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Fujitsu Ltd. and Toshiba Corp. said Thursday they have agreed in principle to integrate their mobile phone businesses.

The two companies said they will establish a joint venture Oct. 1 that will be responsible for their integrated mobile phone businesses, with Fujitsu having a majority stake in the new firm.

Details of the company and its operations will be hammered out before the contract is signed, which they want done by the end of July.

Toshiba and Fujitsu said they will aim to “develop highly competitive next-generation handsets for the expanding smart-phone market” and grab the lead market share in mobile phone handsets.

The firms said their partnership will also aim to develop new handsets for overseas markets.

Under the tieup, Toshiba will first transfer its mobile phone operations, with about 360 developers, to the new company.

The firms hope the integration will also expand their sales networks, as Fujitsu manufactures handsets for NTT DoCoMo Inc., the largest Japanese mobile phone carrier, and Toshiba mainly supplies to No. 2 carrier KDDI Corp.

The integrated entity would have a market share of nearly 20 percent, making it the second-largest mobile phone maker in Japan.

According to Tokyo-based MM Research Institute, domestic shipments of Fujitsu handsets in fiscal 2009 stood at roughly 5.18 million units and ranked third with a share of 15.0 percent, while Toshiba ranked eighth with a share of 3.7 percent, or about 1.26 million units.

Combining Toshiba and Fujitsu would place the two firms behind Sharp Corp., which has a share of 26.2 percent, while overtaking the current No. 2, Panasonic Mobile Communications Co., a mobile phone unit of Panasonic Corp., at 15.1 percent.

Fujitsu is in the black in terms of its mobile phone operations mainly due to its popular Raku Raku phone, which is easy to use and targets elderly customers and others who want a phone with simplified functions.

Toshiba meanwhile is struggling in the mobile phone market. Last year, it ended production of mobile phones in Japan and outsourced it overseas to cut costs.

Shrinking demand for handsets has forced manufacturers to regroup. Most recently, NEC Corp., Hitachi Ltd. and Casio Computer Co. integrated their mobile phone operations.

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