Microsoft Corp. and SanDisk® Corp. today announced they have signed an agreement to deliver a next-generation software and hardware solution to place application programs and personal customization on USB flash drives and flash memory cards, expanding on and replacing SanDisk’s existing U3™ Smart Technology.

Under the terms of the agreement, Microsoft will develop a new software experience and SanDisk will develop new hardware capabilities, including the addition of TrustedFlash™ security technology. SanDisk will incorporate the combined software and hardware solution on removable flash memory cards and Cruzer® USB flash drives. The new offering is expected to be commercially available starting in the second half of 2008.

Effective immediately, Microsoft will engage in discussions with third-party hardware vendors interested in licensing the new software offering. A new entity will be created to license compatible hardware designs, TrustedFlash and other intellectual property from both Microsoft and SanDisk, with revenues to be shared by the two companies.

The new offering will be designed so that users can carry their personal computing environment — including a customized and familiar user interface, applications and data — on a flash storage device such as a USB flash drive or flash memory card. This computing environment will be accessible on Windows XP- and Windows Vista™-based computers with a USB port or flash card reader. Users will be free to work on public or shared computers without fear of leaving personal information behind, and with confidence that their personal information will be encrypted, kept safer from malware, and otherwise protected through security provisions enabled by TrustedFlash technology.