Philips, Sony, HP to Develop Own System for Recording, Playing Data

Electronics giants Philips Electronics and Sony Corp. said Wednesday that, together with Hewlett-Packard Co., they’ll break ranks with eight of the world’s largest electronics companies and develop their own next-generation system for recording and playing data on computers.

Sony and Philips are backing out of an April agreement because they want a standard with greater storage capacity than the others, which include Matsushita Electric Industrial Co., the world’s largest home electronics maker, and Time Warner Inc., the world’s biggest entertainment company.

Philips said its venture with Sony and Hewlett-Packard is limited to recordable DVD technology for personal computers. It emphasized that it will stick to already-agreed formats for non-recording home video and audio technology, the subject of a 10-company agreement on use of DVDs for home entertainment purposes.

“Philips and Sony backed the wrong pony in the videocassette market,” said Rob Friedman, senior vice president at Franklin Mutual Advisers, which manages about $26 billion in assets. “They weren’t a marketing power then. This is a marketing gamble for them.”

Philips said there’s no comparison with the Beta-versus-VHS video-player battle of the 1980s, because the rift involves only rewritable data storage for computers. The standard for movies and audio remains intact.

Still, analysts said it’s the latest salvo in a battle for control of the market for next-generation storage devices, which will probably exceed the current $6-billion-a-year market for CD-ROM players.

The Sony-Matsushita split could also provide an opening for a competing computer storage system developed by Fujitsu Ltd., Japan’s second-largest computer maker.

“It’ll cause confusion among consumers, and that could hamper the spread of these products,” said Hiroshi Takeda, industry analyst at BZW Securities (Japan) Ltd.

That kind of confusion hurt Sony and Philips in the videocassette market, and ultimately they lost a long and bitter war for dominance of that industry after they wrongly bet on Sony’s Beta format. Matsushita Electric is now the world’s largest maker of VCRs.