updated 6/27/2005 9:40:46 AM ET 2005-06-27T13:40:46

In an expansion of their alliance, Microsoft and Toshiba said Monday they plan to develop high-definition DVD players together, cross-license technologies and cooperate in designing new models of mobile personal computers.

The deal, announced by Microsoft Corp. Chairman Bill Gates and Toshiba Corp. President Atsutoshi Nishida, is a big win for the HD-DVD format in its competition against another technology called Blu-ray Disc, which is backed by Sony Corp. and Apple Computers Inc., to become the world standard for next-generation of DVD players.

(MSNBC is a Microsoft-NBC joint venture.)

Gates, who is visiting Japan this week to meet with university students and business leaders, stopped short of calling the agreement exclusive, though he stressed he wanted to see HD-DVD become more widespread.

Nishida said it was unclear what effect the agreement between the Redmond, Wash., software giant and Japanese electronics maker will have on the format war. The competing sides, which have each lined up big-name companies and Hollywood studios for backing, have unsuccessfully been holding talks to try to agree on one standard.

“We feel we have gained a powerful supporter on our side,” Nishida told reporters at a Tokyo hotel, where he appeared with Gates.

The latest deal strengthens an alliance between the two firms, which signed an agreement in April to share patents on audiovisual and computer products. The companies have been working together on personal computers for two decades.

They will develop HD-DVD players by bringing together Microsoft’s expertise in PC technology and Toshiba’s expertise in consumer electronics, the companies said in a joint statement.

Blu-ray has more capacity, with 50 gigabytes, compared to 30 gigabytes for HD-DVD disks. But proponents of HD-DVD say their format is cheaper to make because the production method is similar to current DVDs.

With growth in the traditional personal-computer market slowing, Microsoft has been accelerating efforts to gain a presence in consumer electronics, which is still led by Japanese makers such as Sony and Matsushita Electric Industrial Co., an Osaka-based company that makes Panasonic products.

But competition is intensifying in the electronics sector as rivals such as Samsung Electronics Co. of South Korea and other Asian companies threaten the past Japanese domination in the business.

Gates and Nishida said the two companies agreed to work together on tablet PCs, smaller mobile PCs, using the next version of the Microsoft Windows operating system code-named Longhorn. And sharing technology through cross-licensing will help cut costs and speed up product development, they said.

“This agreement demonstrates our desire to share our innovations with other companies in ways that promote the spread of new ideas,” Gates said.

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