Should Motorola And Sony Ericsson Merge?

[Commentary] view of Motorola's and Sony Ericsson's low global handset market share - less than 5% each - shouldn't they merge? The geographies work: Sony Ericsson has a decent market share in Europe (12.4%), Motorola has a good share of the U.S. (17.3%), Sony Ericsson does OK in India (10%), while Motorola is fine in China (10%). Sanford Bernstein estimates, that by merging, the companies could reduce operating costs by 10%.

But there may be another factor: Next year, there will be a whole new raft of phones based on Google's Android operating system. Android has only been up and running commercially since the summer and is a long way behind Apple Inc.'s iPhone by any metric. But only around a dozen handsets have been available so far and around 30 more are expected next year, many of which will come from Asian suppliers. It would be fair to expect a widening of the Android product range to appeal to different pockets, depending on the graphics cards, accelerometers, GPS, touch screens and keyboards on the device. The general expectation is that they will appeal more to the mid-market than the high-end market. The Android system also differs from Apple as it is a more open ecosystem, with less control of the applications. Not the same as the old 'walled garden versus Internet debate' of a few years ago, but with enough elements for commentators to draw comparisons. While walled-garden approaches tend to be short-to-medium term winners due to the ease of integration and use, open systems have always eventually taken over. The upshot is that while Motorola has its Droid, and it's likely Sony Ericsson will soon have Android phones as well, they will be competing against a raft of new handsets all of which will be utilizing the same operating system.