Both companies have been facing pressure from a declining domestic market (due to subsidy changes and a maturing market) and the increasing cost of developing high end mobile phones. By combining the business together they will hope to cut operational and development costs.
Here's an extract from the press release:
By combining their mobile phone development know-how and technological strengths, Fujitsu and Toshiba intend on enhancing their handset development capabilities and at the same time improving business efficiency. On the basis of these strengths, the companies will manufacture handsets which are responsive to the needs of customers and competitive in the dynamic mobile phone market. Through continuous innovation, Fujitsu and Toshiba will collaborate to develop new handsets for markets in and outside Japan which support rich and rewarding lifestyles.
Currently Fujitsu mainly produces Symbian (MOAP-S) based phones for Japan's dominant carrier - NTT DOCOMO. The most recently announced was the F-06B, which can shoot full HD (1920×1080) video on its 13.2 megapixel camera, is fully waterproof to 1.5 metres (so you can shoot video underwater), can act as a WiFi hotspot and has a WVGA touchscreen, making it one of the world's most advanced mobile phones.
Fujitsu recently shipped the world's first Symbian^2 phone and has announced plans to jointly develop, with NTT DOCOMO, Sharp and Renesas, anext generation mobile software platform that will create a common application framework running on Symbian and Linux.
Toshiba produces handsets for Japan's other operators - KDDI and Softbank - and has also produced a limited number of Windows Mobile based smartphones for the world market.
The combined operations will no doubt look to continue these business areas, but will seek to cross-pollinate technology and innovation ideas between the two companies. Combined they will be better positioned to further expand outside of the Japanese market.