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The 90nm Cell/B.E. package as found in the PlayStation 3, now to be manufactured by Toshiba.  (Source: DailyTech)
Sony gives Toshiba something in return for its troubles -- Japanese Cell chip plants for $835M

A new twist has emerged with the death of HD DVD.  After Warner, Best Buy, Walmart and Netflix jumped on the Blu bandwagon, the fate of HD DVD was already sealed.

Despite the grim news, the principal HD DVD developer, Toshiba Corporation, refused to initially comment on its plans for its HD DVD.  However, as many analysts predicted, Toshiba came out last week and officially surrendered to Blu-ray

Many saw Toshiba's willingness to give up on HD DVD as a logical business decision and perhaps an admission of Blu-ray's superiority.  However, there might be a little more to the story.  Reuters reports that on Wednesday Toshiba and Sony Corporation, one of Blu-ray's principal developers, agreed to a major business deal, reached just after Toshiba made its final HD DVD decision.

Sony agreed to sell it microchip processing facilities in western Japan for approximately $835M USD.  These facilities currently produce Cell processors and RSX graphic chips.  Toshiba will enter the joint venture with Sony on April 1, 2008.

Toshiba, IBM and Sony were the principal developers of the Cell microprocessor, but Toshiba previously showed little interest in using the chip for any of its own projects.  Sony touts the Cell broadband engine in its Playstation 3 consoles; IBM uses the Cell processor in high performance computing clusters.  Toshiba has vowed to now use the Cell in its upcoming products.

While Toshiba and Sony entered into talks back in October 2007 and reached a tentative agreement to sell the cell facilities, the two companies continued to haggle about the price.  Sony's concession of what is considered a favorable price for Toshiba will likely strike many following Toshiba's drop as HD DVD as more than a coincidence, and perhaps a sign of an informal agreement.

The other interesting aspect of the move is that it indicates a clear shift by Toshiba to back the PS3.  The PS3, which last month outsold Microsoft's Xbox 360, previously had few ties to the company; while Microsoft's number one ally in hardware manufacturing has always been Toshiba.  Toshiba manufacturers several components for the Xbox 360, including the HD DVD add-on, and the Microsoft Zune MP3 players.

Toshiba's flip-flop may have been in the cards for a while.  Microsoft showed little remose as HD DVD took second place to Blu-ray; a move Toshiba must have recognized from its American ally.  Now the solidified PS3 venture between Sony and Toshiba indicates that Toshiba now has switched to backing the PS3 almost exclusively, another victory for Sony.


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RE: Business is complex.
By powerincarnate on 2/23/2008 5:21:34 PM , Rating: 4
Gee Wiz learn to read, I said the 360 in the LONG RUN will end up number 3, not quickly.

As for comparison purposes, the 360 and PS3 are very parallel. Both had little games in it's first year of existence, but in the case of the 360, it was the only show in town so it didn't seem like it was lacking anything. Both had subpar sales in it's first year, and if you look at the sales comparison it is quite equal for year 1. Both had or is schedule to have a great year 2 in which the games are now able to tap into the systems power. Where the two splits is that the 360 doesn't have the advantage of having a high definition drive optical drive and have that drive be the new standard in the world. Without any major games released in January, this already has allowed the PS3 to outsell the 360 in january for no other reason than Warner's decision. Combine that with the fact that the PS3 does well in Europe and Japan, while the 360 essentially doesn't exist in Japan, and isn't the hit it is in the US in Europe, and I believe most people will determine that if they were to put their money on it, they would probably pick the PS3 to beat the 360 by the time this console generation is over.

Wii is a different story and there are a lot of reason for it's success. 1. being it's ability to attract casual gamers and parent. 2. It's perceived to be the anti game, the thing that can finally get the kids to exercise. Tons of concerned parents won't buy a game system because they don't want their kids to just plop in front of the TV. 3. The wii comes at a price point even cheaper than the last two console leaders came out (ie... 250 vs. 300) 4. There are still significant amout of people that still don't have a high-definition TV. This will be a different argument after feb 2009, and will definitely be different after Blu-Ray latches on with the public in a few years, and in general, more people will have high definition TVs and will gravitate a bit more to high definition consoles. 5. They had some major 1st party games, a Zelda, a Mario, a Paper mario, a Smash Brothers (at least in Japan and soon the US), a Metriod. So chances are their success will continue, Sony has a lot of reason to believe their success will only improve. What does the 360 has to look forward to??? I guess gears of Wars but like Nintendo some of it's biggest Franchises already came out. Microsoft is in a hard place, it isnt' cheap or easy to pick up like the Wii, and it isn't as advanced with a new high def standard backing it like the Playstation 3.

But I don't expect everyone to agree to my analysis, all I know is, I never actually changed my analysis since Day one because I knew this was going to happen. I knew Sony and it's advance cell will have inferior game year one compared to an easier system to program for in it's second year of existence. I knew eventually, with price drops things will begin to change. And I knew with year two, the advantage will evaporate and the two will be even, and I knew, companies aren't stupid enough to continue this sharade of a system of 2 high definition stardard, in the wake of declining DVD sales. They needed to make a choice, 10-1 blu-ray to HD-DVD players out there will make it impossible for HD-DVD to win. This victory will provide a massive boost to the Playstation 3. With an ever growing install base, I know that 3rd party developers will A. No longer pay little attention to PS3 ports, and B. will be more inclided to have exclusives for the System. Combine that with the fact that I also knew that no matter what Microsoft did, the 360 will NOT sell well in Japan, and It becomes quite easy to make predictions.

Notice I never said anything about the 360 being a poor system. It's a fine system, has the best online experience and has a great library of games. BUT again like my very first words were in my original post. It's funny how businesses work.


RE: Business is complex.
By maverick85wd on 2/25/2008 12:06:03 PM , Rating: 3
Well put!

If I could make your post a 6 instantly I would. You said pretty much everything that needed to be said. I commented in another article on how Sony's decision to put BD capabilities in the PS3 (and Microsoft's decision not to do the same with HD-DVD) was probably the largest influence on the format war, but I kept getting rated down because I couldn't find the right words. You should just write a blog next time!


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