TOKYO (Reuters) - Consumers and investors cheered an impending end to a format war for next-generation DVDs on Monday, with share gains for both Toshiba, on the verge of abandoning its HD DVD discs, and Sony, the leader of the rival Blu-ray camp.
Toshiba Corp shares jumped 6.3 percent as analysts praised its move to cut its losses, while Sony Corp, whose technology is set to become the industry standard for high-definition home DVDs, rose 2.1 percent.
"It doesnt make sense for Toshiba to continue putting effort into this," said Koichi Ogawa, a chief portfolio manager at Daiwa SB Investments. "It needs to cut its losses and focus its resources on promising businesses."
Both formats have the space to hold high-definition movies, but growing support from Hollywood and big U.S. retailers such as Wal-Mart Stores has given Blu-ray a crushing lead.
However, overall sales so far have made up only a small portion of the 24 billion home DVD sector, as shoppers, faced with machines that played only one type of disc or the other, have held back.
"I was expecting Blu-ray to win but I was kind of waiting it out," said Masahiro Taniwaki, a 26-year-old systems engineer shopping for a Blu-ray recorder at electronics retailer Bic Camera in Tokyo.
Toshiba said on Monday that no decisions had been made on HD DVD, but a company source told Reuters on Saturday that the company was in the final stage of planning its exit.
An end to the war means consumers can now be sure they wont be stuck with a 21st century equivalent of Betamax -- Sonys videotape technology that lost out to VHS in the 1980s -- and should help accelerate the shift to the new DVD.
"The two formats, though both were good, have confused consumers and prevented them from moving into the high-def future," said Stephanie Prange, editor in chief of Home Media Magazine.
HOLLYWOOD FAVOURS BLU-RAY
The defection from HD DVD in January of Warner Brothers and its huge film library brought the tally of Hollywood movies in the Blu-ray camp to a commanding 70 percent.
Recent sales figures show many consumers had already written off HD DVD, which was also backed by Microsoft Corp
Blu-ray accounted for 93 percent of next-generation DVD hardware sales in North America in the week after Warners announcement in January, data from the NPD Group showed.
Blu-ray recorders from Sony, Matsushita and Sharp made up about 96 percent of the Japanese market in the last quarter of last year, researcher BCN said.
LOSSES NOW, PROFITS LATER
At the core of both formats are blue lasers, which have a shorter wavelength than red lasers used in current DVD equipment, enabling discs to hold up to five times as much data.
Toshiba had billed its format as less costly for the industry as it allowed some existing DVD-making equipment to be reused, but Blu-ray allowed for more content to be packed onto each disc.
Toshiba will likely suffer losses of hundreds of millions of dollars to scrap production of its equipment and other steps to withdraw from the business, Japanese public broadcaster NHK reported.
But analysts gave high marks to Toshibas quick move to pull the plug on HD DVD just two years after launching its first players. It took Sony more than a decade to quit Betamax.
Nikko Citigroup raised its rating on Toshiba to "buy/high risk" from "hold/high risk." JP Morgan maintained an "overweight" rating while predicting the elimination of sales promotion costs would add 30 billion yen (280 million) to Toshibas operating profit in the next business year from April.
Shares of Toshiba hit 837 yen, their highest since late December but still down nearly a third in the past six months.
Sony shares hit 4,980 yen as the benchmark Nikkei average was up 0.6 percent.
While Toshiba was still officially silent on the fate of its technology, pundits and consumers were clear the war was over.
"Blu-ray won. Its fantastic and I trust Sony," said one customer, William, as he browsed DVD player aisles at the Best Buy Co Inc store on New Yorks Fifth Avenue.
(1=107.83 Yen)
(Additional reporting by Yoko Kubota and Elaine Lies in Tokyo; Steve James in New York and Lisa Baertlein in Los Angeles; Editing by Rodney Joyce)
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