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Toshiba ready to give up HD DVD format

A customer checks Blu-ray disc recorders at a electronics shop in Tokyo yesterday. Japanese investors welcomed Toshiba's signals that it may abandon the HD DVD format, surrendering to Sony's Blu-ray. PHOTO: AFP

Investors welcomed yesterday Toshiba's signals that it may abandon the HD DVD format, surrendering to rival Sony's Blu-ray in the battle to set the next standard of high-definition DVDs (HD DVD).

Toshiba Corp is reviewing its HD DVD business and "a complete withdrawal is one of the options it is considering," an industry source said on condition of anonymity.

Blu-ray and HD DVD -- which are incompatible -- can provide cinematic-quality images and multimedia features, but the players come at a much steeper price than current-generation DVDs.

But a growing number of Hollywood studios and retailers have decided to go exclusively with Blu-ray, which can store more data than HD DVD but was initially seen as more expensive to make.

US retail giant Wal-Mart gave a decisive boost to Blu-ray last week.

Weekend news reports said losses for Toshiba could reach tens of billions of yen (several hundred million US dollars) if it decides on the pullout.

But investors responded positively to the news on the belief that Toshiba, which has enjoyed healthy profits in recent years, was acting quickly to stem losses.

"The availability of software titles decided the battle this time, just like in the VHS-Betamax war."

Yuichi Ishida, analyst at Mizuho Investors Securities

Toshiba shares shot up ?50 (US$0.46), or 6.4 percent, to ?834 in morning trade yesterday, easily outpacing the benchmark Nikkei-225 index which gained 1.3 percent.

Shares in Sony Corp rose ?120 or 2.5 percent to ?4,970.

A victory for Blu-ray would be sweet revenge for Sony, whose Betamax lost out in a similar duel in the early 1980s to Panasonic's VHS to set the standard for videocassettes.

The camp supporting HD DVD includes Microsoft, Intel, Universal Home Studios and Paramount Home Entertainment.

The death of HD DVD has been heralded since last month, when Warner Brothers studio -- Hollywood's largest distributor of DVDs -- pulled out of an alliance with Toshiba and switched to Blu-ray.

Wal-Mart, the world's largest retailer, apparently drove a final nail into the coffin of HD DVD on Friday by announcing it would shift exclusively to selling movies on Blu-ray, following the lead of major US electronics seller Best Buy and the Blockbuster and Netflix movie rental groups.

Toshiba, whose diversifying business interests include US nuclear power plant maker Westinghouse, said yesterday it had not reached a final decision on HD DVD.

"We are cautiously assessing market movements as it is true that Warner Brothers' decision to sell titles exclusively on Blu-ray affected our sales in January," a Toshiba spokeswoman said.

Industry analysts and electronics makers maintain the format war has stifled sales of high-definition DVD players because consumers are waiting for a victor before putting down money for the expensive new technology.

"The availability of software titles decided the battle this time, just like in the VHS-Betamax war," said Yuichi Ishida, analyst at Mizuho Investors Securities.

"Movie distributors have a decisive say as DVD machines would only be an empty box without software," he said.

Ishida said withdrawal would not be so bad for Toshiba, even though it could face difficult negotiations with its partners to dismantle HD DVD manufacturing facilities.

"Toshiba is an excellent maker of electronics parts. I personally think abandoning a complete-set product is not a bad option," he said.

Toshiba will start building two flash memory plants in Japan by March next year with US partner SanDisk Corp, the Nikkei Shimbun reported yesterday without identifying sources.

The plants will be built in Kitakami and Yokkaichi with total investment of up to ?1.8 trillion, the report said.

Toshiba said nothing had been decided on the reported plants.
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