Consumer electronics giant Samsung announced on Thursday its plans to develop products that use Sony's flash-memory format, Memory Stick.
The two companies have not yet signed an agreement, but one is expected soon. Neither company would discuss further details about the pact.
"This is potentially a significant win if Memory Stick can get deep enough into Samsung's product line," IDC analyst Bryan Ma said.
Memory Stick cards are the size of a stick of gum and are used to store data in consumer devices, such as digital cameras and digital-audio players. Samsung was already one of 167 licensees of the Memory Stick, which was introduced in fall 1998. But until now, Samsung had not officially indicated it would manufacture products supporting Memory Stick.
After a somewhat lukewarm response from the market initially, Memory Stick has been picking up speed recently and taking share away from incumbents CompactFlash and SmartMedia.
In spring last year, CompactFlash held a commanding 51 percent of the market and SmartMedia controlled another 41 percent, according to market researcher NPD Intelect. Memory Stick trailed far behind with 7 percent.
A year later, CompactFlash dropped to 42 percent market share and SmartMedia fell to 31 percent. Meanwhile, Memory Stick shot up to 23 percent.
For a Samsung deal to become significant, Ma noted, it's "important for Memory Stick to get into products other than just PCs--for example Samsung's MP3 players."
He added that Sony can't let down its guard now.
"Assuming this gets signed, Sony has to then concentrate on similar deals with the other major consumer electronics makers," Ma said. "Otherwise Memory Stick just becomes the next Betamax."
Flash memory competition has been heating up recently and rivals are dropping prices, which will translate into more affordable deals for consumers looking for gadgets such as digital-audio players. On Wednesday, Sony slashed prices on its Memory Stick cards for a second time this year--this time by up to 37 percent.
Secure Digital is another flash format that is elbowing for room in the market. However, Secure Digital is facing an uphill battle with less than 1 percent market share, according to NPD.
Korea's Samsung currently manufactures SmartMedia cards and will continue to do so despite Thursday's announcement. But Samsung and Sony will work together to develop products that use Memory Stick cards and will jointly promote the format.
In the second half of this year, Samsung plans to introduce external Memory Stick adapters for notebook and desktop PCs. Next year, Samsung PCs will come with built-in slots for Memory Stick cards.
Samsung is also looking to incorporate Memory Stick into digital-audio products, digital camcorders, DVD players, mobile phones, handheld computers and televisions.