Microsoft, Toshiba to develop players for new DVD

Monday, June 27, 2005 | 9:35 a.m.

Microsoft Corp. and Toshiba Corp., which have a patent-sharing agreement on consumer electronics and personal computers, will develop players for next-generation DVDs and the Longhorn operating system for portable computers.

The extended agreement will combine Microsoft's knowledge of personal computers with Toshiba's expertise in consumer electronics, the companies said in a statement. Microsoft's new Xbox 360 video-game console may also use the HD DVD format developed by Toshiba, said Chairman Bill Gates at a Tokyo news conference today.

Microsoft and Toshiba are strengthening their ties as profit margins get squeezed amid rising competition from the likes of Sony Corp. and Samsung Electronics Co. Sony and Samsung, which agreed last December to share patents to speed up product development and ease price competition, have spent 2.1 trillion won ($2.1 billion) on a venture to make liquid-crystal displays.

"The market for digital consumer products, including PCs, is huge and may develop in any number of ways," said Toshiba President Atsutoshi Nishida. "The alliance will definitely be beneficial for both Toshiba and Microsoft."

Microsoft is a member of the DVD Forum, a group that promotes the HD DVD technology Toshiba helped develop as a standard for the new DVDs that can store more high-definition pictures and other content than existing DVDs. Sony and Samsung back the competing Blu-ray disc format.

"The initial shipments of Xbox 360 will be based on today's DVD format," Gates said. "We are looking at whether future versions of Xbox will incorporate an additional capability of an HD DVD player or something else."

Gates said Microsoft hasn't "solely" backed either DVD format.

Toshiba will also make mobile devices such as Tablet PCs and handheld computers that will use Microsoft's next version of its Windows operating system known as Longhorn, the companies said today. Windows is used on about 95 percent of the world's computers.