MS buying Nokia is probably good for MS and Nokia. I do not think that Nokia would succeed in the Android world. I supposed they could continue as a declining company for quite a while with Android handsets, but I do not see them ever being #1 again, they have lost too much ground. But, with MS $$ they have a chance of growing in the smartphone business.
I think that eventually MS will gain ground in the smartphone world. I think they will remain in third place, but they will probably be hot on the heels of Apple. Which will be a good thing - it will spur innovation and competition. I do not think MS would be able to even compete without Nokia. They have to have a dedicated company, and buying Nokia is the insurance they needed.