The end of the format battle is finally here.
Toshiba said overnight it will withdraw from the HD DVD business causing U.S.-listed shares of Sony Corp to rally to a 3-week high on Tuesday on optimism over sales of its PlayStation 3 video game consoles and Blu-ray DVD players.
The company, which began sales of HD DVD in March 2006 with the HD-A1 player, decided it was not right for us to keep going with such a small presence, said chief executive Atsutoshi Nishida in a statement.
Toshiba said it would stop making HD DVD players and recorders by the end of next month, and will also stop producing HD DVDs for use in PCs and game consoles.
We believe Blu-ray's victory could drive market share gains for the PS3, as we believe consumers will now be more willing to pay up (versus 360) for the standard Blu-ray player, William Blair analyst Ralph Shackart wrote in a note to clients, referring to Microsoft Corp's rival Xbox 360 game device.
Sony U.S. shares soared to a session high of $47.07 in early trade on the New York Stock Exchange before easing to $46.90, up $2.514, or 4.8 percent from the Friday close. The intraday high was the highest price seen since January 31.
Toshiba's announcement came four days after Wal-Mart Stores, the world's largest retailer, announced it would stop selling HD DVD movies and players by June.
The turning point in the format battle came last month when Warner Bros. Home Entertainment Group, which accounts for 20 percent of DVD sales in the U.S., decided to ship all of its high-definition titles only in Blu-ray by the end 2008. Sony's Blu-ray format was already supported by industry heavyweights like Netflix and Best Buy.
The end of the format battle means that customer don't have the unnecessary confusion of choosing between two competing and incompatible technologies. Most consumers have shunned high-definition DVDs and players to avoid being on the losing end of the format war, which was reminiscent of the battle between Betamax and VHS in the early days of videocassette recorder in the 1980's. VHS eventually won over Sony-backed Betamax.