Apparently many hedge funds lost a lot by betting against Nokia. They weren't counting on MSFT buying the company's handset business.
A few thoughts:
1. Even though hedge funds have the word "hedge" in their title, they frequently don't. It is very common for them to take one way directional bets. The idea that somehow hedge funds are doing something clever and special is just not true.
2. If the hedge funds were trying to hedge, the smart move would have been to be long Nokia and short MSFT. Of course, it's easy to see that after the event -- but that's the point -- predicting the market is a fool's errand.
3. The one thing that hedge funds are good at is getting paid to make these bets. The typical fee structure is 2% of assets under management plus 20% of all gains. A classic heads "I win, tails you loose" fee structure.