There were further signs of consolidation in the market today with the news that messaging specialists Logica and CMG are planning to merge (see CMG, Logica May Merge).

Once two of the main players in the messaging systems market, they have been forced into relatively minor roles by the sheer market might of Ericsson AB (Nasdaq: ERICY) and Nokia Corp. (NYSE: NOK), which have each won numerous next-generation messaging system deals with existing infrastructure customers. Despite the likes of Logica bravely predicting earlier this year that their experience in messaging would see them through and continue to win them contracts, this merger move looks to be the result of ever increasing market pressure from the two Scandinavian giants.

Add the fact that both Logica and CMG are also in the IT services market, which has shrunk considerably in the past 12 to 18 months, and a merger looks to have some merits from a cost-cutting and "downsizing" perspective.

Should it happen, the culture clash between the two companies could be interesting, given their current rivalry. And the pooling of resources (if they merge and manage not to screw it all up) could spell further bad news for the other firms still trying to make a living in the messaging world, such as Comverse Ltd., Tecnomen Corp., and Openwave Systems Inc. (Nasdaq: OPWV).

— Ray Le Maistre, European Editor, Unstrung
www.unstrung.com