Sony, NEC to combine optical drive businesses

Sony and NEC have concluded a basic agreement to merge their optical disc drive businesses, they said Thursday.

Sony and NEC have concluded a basic agreement to merge their optical-disc drive businesses into a new company, they said Thursday.

The two companies hope to launch the new venture on April 1, 2006, which is the first day of the new financial year in Japan. Sony will hold a 55 percent stake in the as-yet-unnamed company and NEC will hold the remaining 45 percent stake, according to the terms of a memorandum of understanding signed by the companies.

The new joint venture will work on planning, design, manufacturing and marketing of optical-disc drives for products such as personal computers and DVD players, they said in a statement. In the next-generation optical disc market the company will manufacture drives for both the HD-DVD format, of which NEC is a major backer, and Blu-ray Disc, of which Sony is a leading supporter, both companies said.

The merger plans bring together NEC's optical-disc LSI (large scale integrated circuit) chip technology with Sony's optical pick-up technology. Both companies are already major manufacturers of optical-disc drives.

Discussions on a merger grew out of a business relationship that began in the middle of this year when NEC started ordering parts for its drives from Sony, said Sojiro Shimura, a spokesman for NEC in Tokyo.

In the course of discussions between the two companies the conclusion was reached that the respective businesses were more complementary than competitive, said Gerald Cavanagh, a Sony spokesman in Tokyo. "There was a feeling that those two complementary strengths would make more sense in a joint venture than competing against each other," he said.

The optical disc drive businesses of Sony and NEC generated a combined revenue of YEN 220 billion in the fiscal year from April 2004 to March 2005, they said. Together they have an estimated optical-disc drive market share of around 20 percent, according to the companies.

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