The problem with such a merger is that there is still the possibility of an unknown player popping in and creating yet another console war. Names like Phillips, Apple, Mitsubishi, Panasonic... the list is long. All of these mega-corps could jump in if Sony, and Microsoft merged. I don't think it would happen.
I would think that Microsoft might just buy out Sega or the other way around (whichever way is more feasible.) I'm not looking for an argument here so anyone who wants to try and start one; have fun talking to yourselves. I figure that what companies do is their own choice. Bungie was making a decent amount of money then just broke off with Microsoft and stopped producing Halo and what not. For all we know, Microsoft might just go out of business. The future is unknown! D:< FORWARD WITH TOMOCHI!