Toshiba is planning to give up its HD DVD format for high definition DVDs, conceding defeat to the competing Blu-Ray technology backed by Sony Corp. -- PHOTO: REUTERS

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 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 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.

Toshiba shares shot up 50 yen (S$0.65)or 6.38 per cent to 834 yen in morning trade, easily outpacing the benchmark Nikkei-225 index which gained 1.28 per cent.

Shares in Sony Corp rose 120 yen or 2.47 per cent 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 - or High-Definition DVD - includes Microsoft, Intel, Universal Home Studios, and Paramount Home Entertainment.

The death of HD DVD has been heralded since January, 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 on Monday it has not reached a final conclusion on HD DVD.

'We are cautiously assessing market movements as it is true that Warner Brother's 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.

Mr Ishida said withdrawal would not be so bad for Toshiba, even though it may 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.

As the company focuses more on growth areas, Toshiba will start building two flash memory plants in Japan by March 2009 jointly with US partner SanDisk Corp, the Nikkei daily reported Monday without identifying sources.

The plants will be built in the northern city of Kitakami and the western city of Yokkaichi with total investment, including spending by SanDisk, of up to 1.8 trillion yen, the report said.

Toshiba said nothing had been decided on the reported plants. -- AFP