Microsoft Corp. and Toshiba Corp. said they may work together on next-generation DVD players, in a step that -- if realized -- could strengthen Toshiba's hand in a war with other electronics companies over what the format of those future DVDs will be.

Microsoft and Toshiba said they will "investigate development" of next-generation DVD players that use a Toshiba-backed format called HD DVD and run on an operating system called Windows CE, which Microsoft designed for consumer electronics devices.

The agreement could be a boon for Toshiba, whose HD DVD format is vying with a format called Blu-ray, backed by Sony Corp. and Matsushita Electric Industrial Co. The formats call for differently designed discs, but both have the capacity to store hours of crystal-clear, high-definition video.

Toshiba plans to sell its first HD DVD players by the end of this year, but those first versions will not use Windows CE, the company said.

Putting Windows CE in Toshiba HD DVD players also could help Microsoft in its quest to put its software in more consumer electronics devices and to make sure those devices work smoothly with personal computers. So far, few of the Japanese electronics giants have used Windows CE in their consumer electronics products.

Microsoft Chairman Bill Gates, at a news conference with new Toshiba President Atsutoshi Nishida, was careful to say Microsoft was not endorsing HD DVD over Blu-ray. Still, he pointed out Microsoft's strong ties to Toshiba and the HD DVD support group, of which it is a member.

"We have taken a neutral position relative to the formats," Gates said. "But of course, [in] the strong dialogue we have around the Windows CE-based player . . . we've benefited from the close relationship we have with Toshiba."

Gates also said that, although Microsoft is planning to use regular DVD drives in initial shipments of its Xbox 360 video game console, scheduled for release by year's end, it is considering using a next-generation DVD format in future versions. Sony has said its rival PlayStation 3 videogame console, expected out in spring 2006, will play Blu-ray discs.

Microsoft Chairman Bill Gates said yesterday that future versions of the Xbox 360 may use the new DVD format.