Wall Street Journal: "Toshiba Regroups After Losing DVD War"

[JTK]

This piece tells you exactly why Blu-Ray won and HD-DVD lost with facts, figures, and zero FUD. It's the best summary of all of it that I've seen yet.


http://online.wsj.com/article/SB1203...ain_whats_news

Toshiba Regroups After Losing DVD War
CEO Announces Plans
To Invest $15.71 Billion
In Flash-Memory Push
By YUKARI IWATANI KANE
February 20, 2008; Page B3

TOKYO -- Toshiba Corp. pulled out of the high-definition DVD business, blaming the loss of support from a key movie studio and handing victory in a format war to Sony Corp.'s Blu-ray technology.

Toshiba, a Japanese conglomerate that makes products from chips to nuclear reactors, said it would cease production of its HD DVD players and recorders immediately and end the business by the end of March.

"It was a heartbreaking decision," Toshiba Chief Executive Atsutoshi Nishida told a news conference. "But we considered the impact of continuing the business on our operations, the next-generation DVD market and consumers."

Mr. Nishida said it was important to take action quickly. He simultaneously announced plans to strengthen Toshiba's flash-memory business by investing more than 1.7 trillion yen ($15.71 billion) along with its U.S. partner SanDisk Corp. to construct two plants in Japan. Flash memory is a kind of chip typically used in digital cameras and music players because it is light and small.

Computer makers are slowly starting to replace hard-disk drives with flash memory. Use of flash chips slashes boot-up times and makes laptops lighter. The chips are still too expensive to be used widely in computers, but a continuing price decline could increase demand.

The DVD format battle had been fought during the past several years. Sony has led a group backing its Blu-ray technology. Toshiba has promoted its HD DVD format, which it touted as the affordable choice for consumers. Persuading major film studios to issue movies in their formats was crucial.

"Our goal now is to educate the consumer about the advantages of high-definition now that the format war is over," said Howard Stringer, Sony chief executive, in a telephone interview. "A lot of people have obviously been sitting on the fence."

Mr. Nishida said he realized there was no chance of winning the battle after Time Warner Inc.'s Warner Bros. decided last month to side with Blu-ray. Time Warner is a longtime Toshiba partner but saw that Blu-ray software sales were significantly outpacing those of HD DVD. Since then, U.S. retailers from Best Buy Co. to Wal-Mart Stores Inc. have backed Blu-ray in the hope of putting an end to the battle, which has deterred many consumers from buying high-definition DVD players.

Toshiba's quick surrender is a sign of how grim the situation had become for the HD DVD side. The decision was unusually swift for a Japanese company, especially over an issue where corporate pride is at stake, and analysts had assumed Toshiba would let the business fade out quietly.
[Silver lining charts]

Investors welcomed Toshiba's pullout because the company no longer will spend money on a losing technology and it can focus on areas that are potentially more profitable. Since the news broke over the weekend, Toshiba's share price has risen 5% to 824 yen on the Tokyo Stock Exchange.

Toshiba had hoped to increase its relatively small presence in the consumer-electronics industry, making it a pillar of growth in addition to its semiconductor and nuclear-reactor businesses.

Toshiba said about one million HD DVD players have been sold globally since they went on sale in March 2006, including players that can be attached to Microsoft Corp.'s Xbox 360 videogame console. That was far short of Blu-ray's 6.3 million players, according to the Blu-ray Disc Association. That figure includes sales of Sony's PlayStation 3 videogame console, which has a Blu-ray player.

Sony's Mr. Stringer said PlayStation 3 users played a big role in the format battle. "The early adopters were obviously the games enthusiasts, but before Christmas, we began to move past the early adopters into the mainstream audience...and that clearly drove content sales exponentially forward."