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Sony, NEC To Merge Optical Disk Drive Businesses

The joint venture, still unnamed, will combine Sony's present optical disk business, worth about $1.26 billion, with NEC's DVD disk drive business, worth about $589 million.

InformationWeek Staff

November 17, 2005

2 Min Read

TOKYO — Sony Corp. and NEC Corp. signed Thursday (Nov. 17) a memorandum of understanding (MOU) that they would establish a joint venture company in the optical disk drive business, aiming to be the top optical disk drive manufacturer in the world. The as yet unnamed company is due to start operations with the financial year on April 1 next year.

The joint venture will merge Sony's present optical disk business including CD and DVD, which is worth about 150 billion yen (about $1.26 billion), and NEC's DVD disk drive business worth about 70 billion yen (about $589 million). Sony is destined to hold a 55 percent stake in the JV and NEC a 45 percent stake. Sony will designate the president while NEC will designate the vice president of the company.

The two companies are already leaders in the next generation of optical disc systems but find themselves in two different camps. Sony leads the Blu-ray Disc group while NEC has been promoting the HD DVD format with Toshiba Corp.

The joint venture is committed to producing HD DVD drives that NEC has already received orders for, but thereafter that the new company will decide by itself what drives to make, a Sony spokesman said.

NEC will continue to support the HD DVD format and the merger is basically to boost present CD and DVD business, said a spokesman of NEC. And the new company will deal with the both formats of next-generation optical disk drives for customers, he said.

Merging advantages of its respective parents, such as Sony's optical pickups and NEC's system-on-chip LSIs, and creating greater economy of scale should allow the joint venture to take aim at the present top optical disk drive supplier, Hitachi LG Data Storage Inc., which has nearly 30 percent of the market by units and annual sales of over $2 billion.

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