Japanese Players Talk Handset Merger

Apparently NEC Corp., Hitachi Ltd., and Casio Computer Co. have begun talks about merging their mobile-handset operations, according to a report in the Wall Street Journal.

Details aren’t yet available regarding the mandate or structure of the proposed merger, but the idea makes sense on paper. A combined NEC-Hitachi-Casio would have Japanese market share of about 20 percent, behind Sharp at about 22 percent and ahead of Panasonic Corp. with 16 percent, according to recent numbers from market-research firm BCN Inc.

Mergers and joint ventures are complicated beasts, though. Assuming that NEC, Hitachi, and Casio agree on how to merge their handset operations, the organizational integration wouldn’t proceed seamlessly. The three-into-one handset vendor would likely suffer initial market-share losses as the mergedassets were consolidated and streamlined.

Still, even assuming that hitches will ensue, the merger makes sense. It would reduce development costs for the companies involved, give them a fighting chance to reclaim ground against Sharp in their home market, and put them in a stronger operational position to expand into other Asian markets, including China.

I’d say the talks are justified.

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