Microsoft has signed an agreement with SanDisk regarding the development of new USB Flash drives. The two companies aims to extend and replace U3 Smart Technology. As a partner in the new agreement, Microsoft will develop new software so that users can carry their personal computing environment on a flash storage. The new devices will be accessible on Windows XP- and Windows Vista-based computers with a USB port or flash card reader.

SanDisk will be responsible to incorporate the combined software and hardware solution on removable flash memory cards and Cruzer USB flash drives, which are going to  to be commercially available in the second half of 2008.

Beside the software and hardware technologies, the new drives jointly developed by Microsoft and SanDisk will offer TrustedFlash security technology.

“The U3 platform was established with the vision of giving customers a consistent and portable computing experience. The existing 20,000 U3 software developers that joined us show the potential for smart flash memory devices,” said Yoram Cedar, executive vice president of the Mobile Business Unit and Corporate Engineering at SanDisk. “We expect this relationship with Microsoft will raise the overall experience for consumers given Microsoft’s unique software expertise, and grow the momentum given the large community of third-party companies capable of utilizing Microsoft’s technologies.”

U3 technology was initially developed by U3 LLC, a joint venture of SanDisk and m-systems. In 2006, SanDisk acquired m-systems and today U3 LLC is a wholly owned subsidiary of SanDisk.

SanDisk didn’t offered any explanations why is dumping U3 technology, but the company said will continue to actively support the U3 products until next year.