Sony and NEC Merge Optical Storage Business

This week Sony has officially announced an alliance with NEC where the two companies will combine their optical drive businesses. The deal is said to have been finalized last Monday. In the agreement Sony will control 55% of the business while NEC controls 45%. Sony and NEC's new optical storage operations have been dubbed "Sony NEC Optiarc INC" and will commence at the start of April.

Analyst's say by combining the merger will control some 20% of the global market. This will put the Sony/NEC operation just behind another optical storage joint operation called Hitachi-LG Data Storage which controls 28%.

Ironically NEC is a backer of HD DVD, competitor to Sony's own Blu-Ray. But even in light of this new agreement NEC has no intention of withdrawing support for HD DVD. This deal had originally been planned back in November '05 and at that time there was some speculation that NEC might abandon HD DVD in favor of Sony's Blu-Ray. But rather than NEC backing out, Sony has acknowledged that under the new agreement they might end up producing HD DVD players.

Rick Clancy, Senior Vice President of communications for Sony Electronics in San Diego said:

"It is conceivable that there could be a variety of disk-drive requests produced, based on requests for a variety of customers… perhaps even that other format."

Sony says this agreement will in no way diminish its support of the Blu-Ray format. As the primary producer of optical components used in the drive so it should still control the Blu-Ray technology.

The optical storage business is hot and both Sony and Toshiba have been forming partnerships in an effort to promote their respective technologies. According to a statement from a Toshiba rep, NEC has informed Toshiba that it will continue to support HD DVD. Toshiba formed a similar venture back in 2003 where it merged optical storage operations with Samsung. The Toshiba Samsung Storage Technology Corporation will place emphasis on the home market where Sony NEC Optiarc Inc will primarily focus on drives intended for PCs.

Could the Sony/NEC merger represent a further compromise for Toshiba and HD DVD? So far in the format war it seems that Blu-Ray is running away with the lead in overall industry support. If Sony's upper hand at 55% in this deal is any indication of NEC's ability to support HD DVD in the long term, it doesn't look good for Toshiba.

Special Thanks to www.hometheaterfocus.com