This makes perfect sense. Toshiba own the HD DVD patents and they are at war with Sony, as are Microsoft. They can see the Trojan horse effect that Sony are getting with Blu-Ray on the PS3 (or, at least, will get when the PS3 starts selling) and they want some. So forming a closer alliance with Microsoft is the perfect mechanism to do that. This could take many forms with new models and lower prices for the HD DVD mechanism.

Microsoft, on the other hand, have struggled with Xbox in Japan since day one. It is proving to be a tougher nut to crack than their worst nightmares. So an alliance with a Japanese company makes exceptionally good sense. Even going so far as letting Toshiba produce their own brand of 360. Then it would be a Japanese machine and so it would get all the Japanese industry support that it needs. Whilst Microsoft still make money from the software.

360 could end up being a standard built into a wide range of consumer electronics such as set top HD DVD players and the TVs themselves. This would further benefit both Microsoft and Toshiba. The potential synergies are massive.

And supposedly all this has been revealed by a senior Toshiba executive in an unguarded moment.

So do you think this is likely? And if it is, just how big will it be?