Microsoft and Toshiba Cut Research Deal

The more I think about Microsoft siding with Toshiba, the more likely I think it is that they will end up winning the format war.

Microsoft and Toshiba said Monday that they would work together to develop next-generation DVD players, heating up a race between competing technologies for DVD’s.

The companies aim to develop high-definition DVD players that would use software from Microsoft and hardware from Toshiba, the companies said.

But the agreement offers a potential leg up to Toshiba in its battle against a group led by Sony to define the format for the next generation of DVD players. Sony is championing the Blu-ray technology, with discs that have more capacity than the HD-DVD format that Toshiba is backing. With no machines on the market yet, it is unclear which format will become the standard.

Recent talks between Toshiba and Sony aimed at unifying the technologies reached an impasse, increasing the chances that consumers will eventually determine the dominant format by voting with their purchases.

The agreement was announced Monday by Bill Gates, the chairman of Microsoft, and Atsutoshi Nishida, the chief executive of Toshiba. It is an expansion of a pact signed in April, when the two companies agreed to cross-license patents on software and digital consumer electronics. Both agreements are aimed at speeding the development of video recorders and other consumer electronics devices with more computer-like features.

The alliance is the first of its kind between Microsoft and a major Japanese electronics maker, and could pave the way for similar deals between Microsoft and other hardware manufacturers.

“We are very pleased to have this agreement with Toshiba, and I think others may see that as a model,” Mr. Gates told reporters at a Tokyo hotel. [Read the rest]