TOKYO — Toshiba may pull the plug on its HD DVD business, the Japanese electronics maker said Monday, in what would signal the almost certain defeat of its next-generation video format to rival Blu-ray technology.
Toshiba Corp. said that no decision has been made but acknowledged it had started a review of its HD DVD business strategy. The company statement was issued after weekend reports from Japanese media, including Kyodo News, that Toshiba is studying a possible withdrawal from HD DVD.
A company official, speaking on condition of anonymity as she is not authorized to speak on the matter, said a board meeting could be held as soon as Tuesday, where a decision is likely.
HD DVD has been competing against Blu-ray disc technology, backed by Sony Corp., Matsushita Electric Industrial Co., which makes Panasonic brand products, five major Hollywood movie studios and others.
Only one high-definition video format has been expected to emerge as the winner, much like VHS trumped Sony's Betamax in the video format battle of the 1980s.
Despite the reports, Toshiba's stock soared 6.4 percent in morning trading. The gain underlines how the market is welcoming the relatively quick decision as lessening the potential damage in losses in the HD DVD operations, despite the blow to Toshiba's prestige.
The news of the possible demise of HD DVD also prompted Nikko Citigroup analysts to raise their rating on Toshiba to Buy from Neutral, noting that Toshiba was making a smart move.
"On the earnings front, its operating profit will likely gain by 20 percent from the next fiscal year," said analyst Hiroyuki Masuko.
The reasons behind Blu-ray's apparent triumph over HD DVD are complex, analysts said, as marketing, management maneuvers and other factors are believed to have played into the shift to Blu-ray's favor that became more decisive during the critical holiday shopping season.
Recently, the Blu-ray disc format has been gaining market share, especially in Japan, where studies showed more than 80 percent of the purchases were Blu-ray.
On Friday, Wal-Mart Stores Inc., the largest U.S. retailer, said it will sell only Blu-ray DVDs and hardware and no longer carry HD DVD offerings.
The announcement came five days after Netflix Inc. said it will cease carrying rentals in HD DVD. Several major U.S. retailers have made similar decisions, including Target Corp. and Blockbuster Inc.
The decision of movie studios was also key.
Last month, Warner Bros. Entertainment decided to release movie discs only in the Blu-ray format, becoming the latest studio to reject HD DVD.
That left only Viacom Inc.'s Paramount Pictures and General Electric Co.'s Universal Pictures as exclusive supporters of HD DVD.
In addition to Warner Bros., Blu-ray is now backed by Sony Pictures, Walt Disney Co. and News Corp.'s Twentieth Century Fox.
Both formats deliver crisp, clear high-definition pictures and sound, but they are incompatible with each other, and neither plays on older DVD players.
HD DVD was touted as being cheaper because it was more similar to previous video technology, while Blu-ray boasted bigger recording capacity than HD DVD.
Adding to Blu-ray's momentum was the gradual increase in sales of Sony's PlayStation 3 home video-game console, which also works as a Blu-ray player. Sony has sold 10.5 million PS3 machines worldwide since the machine went on sale late 2006.
But PS3 sales have trailed the blockbuster Wii machine from Nintendo Co., and the game machine wasn't widely seen as that critical to the video format battle.
Its predecessor PlayStation 2 was instrumental in helping spread the popularity of old-style DVDs, but there was no comparable format rivalry at that time.
Toshiba is expected to focus its resources on its other businesses, including computer chip production, such as flash-memory, which are used in digital cameras and cell phones.
The Nikkei, Japan's top business newspaper, reported in its Monday's editions that Toshiba plans to invest as much as 1.8 trillion yen ($16.7 billion) in two plants in Japan for its flash memory business for fiscal 2008, starting April 1. Toshiba said no decision has been made.