Sony and NEC are to merge their respective optical drive divisions into a single ¥220bn ($1.9bn) jointly owned company, Sony NEC Optiarc, the two Japanese giants announced today. The move may pave the way for reconciliation between the two next-generation optical disc formats, Blu-ray Disc and HD DVD.

Sony will be the bigger of the two stakeholders in the joint venture. It will own 55 per cent of Sony NEC Optiarc, to NEC's 45 per cent. Indeed, the JV will be run by Sony staffer Shinichi Yamamura, currently deputy president of Sony's Video Business Group.

The two parents will spin out their respective optical drive businesses on 1 April before establishing the JV on 3 April. Sony NEC Optiarc will then take over the two spun out divisions.

Both Sony and NEC sit on separate sides of the fence when it comes to next-generation optical disc formats. Sony back Blu-ray, while NEC is an HD DVD supporter. Indeed, just as Sony was one of the minds behind its chosen format, NEC co-developed HD DVD with Toshiba. NEC has been instrumental in developing some of the earliest HD DVD reader and writer drives, and the division responsible will now be part of a company mostly owned by Sony.

Of course, the optical drive market extends much, much further than next-generation formats - the two divisions that will make up Sony NEC Optiarc yielded combined revenues of ¥220bn ($1.9bn) during their respective FY2004. ®