Microsoft and Toshiba in DVD link

Microsoft and Toshiba on Monday said they would jointly investigate the development of High Definition-DVD (HD-DVD) players, in a move that considerably strengthens the Japanese consumer electronic group's position in the ongoing format wars over next-generation DVDs.

Backing from Microsoft will provide Toshiba with additional leverage in its battle against Sony over a single, unified format for next-generation DVDs. Sony heads a group that favours Blu-ray, a rival technology, and the two companies are at loggerheads despite months of negotiations.

“From the HD-DVD viewpoint we now have a very strong supporter,” said Atsutoshi Nishida, the president and chief executive of Toshiba. “We want to leverage this support and come up with a concrete outcome.”

Though Microsoft is a member of the HD-DVD group, Bill Gates, its chairman, said on Monday that the company maintained a neutral position with regard to the format wars.

Sony said on Monday: “Microsoft commented that they are in a neutral position, so we totally understand.” Toshiba said the two companies were still in negotiations, but said there was no specific date set for the next meeting.

Microsoft and Toshiba said they would investigate development of HD-DVD players using Microsoft Windows CE technology and would strengthen their collaboration on iHD, a next-generation DVD interactivity format.

The two companies said they would expand their agreement to share hardware and software technologies, and would develop mobile PCs with the next version of the Windows operating system, known as “Longhorn”.

In April, Microsoft and Toshiba signed a cross-licensing agreement that allows each company to use the other's patents on computer and digital electronics technologies.

Asked whether Microsoft might pursue a similar agreement with Sony, Mr Gates said: “Our relationship with Sony is perhaps more complex than it is with other companies. We have collaboration and we have competition.”

With both Toshiba and Sony unable to reach a compromise regarding a unified format for next generation DVDs, Hollywood's movie studios could play the decisive role in the unfolding battle. The Blu-ray Disc group is backed by Sony Pictures and Disney, while the HD-DVD format is supported by Warner Brothers, Paramount and Universal.

Industry experts say an agreement between Sony and Matsushita's Blu-ray group and the HD-DVD camp headed by Toshiba is crucial to avoid a damaging re- run of the video war between Betamax and VHS 20 years ago.

Failure by Toshiba and Sony to agree a unified format could lead to confusion in the market and discourage consumers from adopting the new products.