Business Week are reporting that Microsoft and Toshiba have entered into an expanded alliance to promote HD DVD over Blu-ray for the next generation of optical disc and to cooperate in designing new models of mobile personal computers.
This heats up the format war considerably as it means that an HD DVD drive is likely to go into a future release of Xbox 360 (the first generation ships with a standard CD/DVD drive), although the front-runner Playstation 3 will have the competing Blu-ray. The agreement does provide Hitachi with a powerful ally in the battle and makes the likelihood of a unified format less likely.
Although Blu-ray has more capacity and is designed as a record format from the outset, HD DVD is most like current DVDs for production, which may sway some replicators. Ultimately, however, if the solution presented to consumers is not clear, they may skip both Blu-ray and HD DVD completely, opting for High Definition video on current DVDs using H.264 or Windows Media 9 (VC-1) or wait until one of the holographic formats is established.
The two companies, Microsoft and Toshiba, will also work together on Tablet PCs, smaller mobile PCs (using Longhorn, so they are not close to release).