Casio, Hitachi, NEC Merging Handset Divisions

Casio, Hitachi, and NEC said Monday they would be merging their mobile businesses to create a company that would become the second-largest handset maker in Japan.

The joint venture will be called NEC Casio Mobile Communications, and it will focus on creating ultra-thin devices that utilize Linux, W-CDMA, and Long-Term Evolution technologies. The companies said they will share resources and technology in order to cut development costs and increase their brands.

Casio and Hitachi have had their mobile businesses combined since 2004, and the larger integration with NEC is expected to be completed in April 2010. Under the terms of the deal, NEC will own 66% of the company, while Hitachi and Casio will hold 16.6% and 17.3%, respectively. The companies plan to raise additional capital by June 2010, which would increase the ownership stakes of Casio and NEC, while decreasing Hitachi's share.

The Japanese market is considered one of the most advanced in the world, as cellular subscribers routinely use their handsets to watch TV, pay for cab rides, and get turn-by-turn directions. But the market is also very saturated, and handset makers and service providers are not seeing large room for growth.

Additionally, none of the major Japanese handset makers have been able to gain significant traction in foreign markets despite technologically advanced phones. NEC Casio Mobile Communications may be able to get devices in the U.S. market because Casio and Hitachi already do business with Verizon Wireless.

NEC, Casio, and Hitachi are not the only Japanese companies looking to tap into the U.S. cellular market, as service provider NTT DoCoMo may be looking to become a mobile virtual network operator in the United States that focuses on high-end handsets with advanced mobile services.

Most companies are just starting the hard work of mobilizing workforces by bringing the software they use to smartphones. InformationWeek analyzed this issue in an independent report, and it can be downloaded here (registration required).