Sony and NEC officially announced on Monday that they have signed a definitive agreement to establish a joint venture company in their optical disc drive business, Sony NEC Optiarc Inc., that "will take a neutral stance to both formats.", according to a NEC spokesperson.

Sony and NEC will separate their respective optical disc drive businesses on April 1, 2006 in preparation for creating this joint venture. The planned date of establishment of Sony NEC Optiarc Inc, is April 3, 2006 and it will take over the two separated businesses in creating one company.

Shinichi Yamamura, currently Deputy President of Video Business Group of Sony, will serve as the president of the new company. .

Sony NEC Optiar will handle the optical drive businesses of both companies including manufacturing, marketing and sales of drives for the Sony-backed Blu-ray Disc technology and NEC-backed HD-DVD technology. It will also handle development and engineering of optical drives, the companies said.

The merger is expected to take advantage of NEC's expertise in optical-disc LSI (large scale integrated circuit) chip technology and Sony'as strength in optical pick-ups.

In addition, the joint venture could offer NEC access to a number of patents related to the Blu-Ray technology, which are held by Sony. Some industry analysts predict that Sony will shift NEC's development to the Blu-Ray format, or that the new company could sell drives in both formats. A Sony spokesperson said when commenting on the new company's format adoption that "The company will make its judgment after monitoring the market's trend."

NEC has announced that it would transfer the manufacturing and marketing of its HD DVD products as well as DVD products to the new company. Sony is also expected to manufacture and market its Blu-ray Disc products through the new company.