Toshiba bows out to Sony in the HD war

Sony (SNE), the Japanese electronics powerhouse, received good word from Toshiba (TO) last week, as Toshiba withdrew its bid from the new high definition format war. Toshiba, maker of HD DVD, announced that it would stop production of HD DVDs and players – giving the victory to Sony’s BluRay.

Sony and Toshiba have been in a bitter battle for the next generation high definition media standard. Both companies piloted their own new high definition media, completely incompatible of each other. Many people thought the new format war to be much like the Betamax and VHS war in the 1970s. Thirty years ago, Sony produced the Betamax player, which eventually lost out to VHS as the standard for video.

PS3 sales to grow

Toshiba’s resignation gives new value to Sony as an investment option. Sony’s BluRay is embedded in its popular game console, the Playstation 3. Experts expect that many consumers waiting on the sidelines for a clear cut winner will now purchase a new generation player, as the fear of buying a worthless model has settled.

Toshiba had been cutting prices quickly on its HD DVD players, ultimately lowering the price to a low of $150 before giving up their bid. Sony has been selling BluRay players at $400, proving that price points weren’t the main seller.

A great investment

Sony looks like a great investment at less than 20 times next year’s earnings. No competition in the next generation media war means Sony has the advantage in price points. Many experts thought that Sony was selling the players below their actual cost in an attempt to spur demand. Now that Toshiba is out of the race, Sony can practically set its own price for the players.

Expect standalone BluRay players and compatible PS3s to fly off the shelves, as consumers no longer worry of buying a dead format. Sony has at least a decade of pure profit from the BluRay line until the next successor comes along. No concrete figures on BluRay sales have been published thus far, but estimates put total BluRay player sales at less than 10 million worldwide. This provides the opportunity for further growth for Sony and its BluRay line in the next few years.

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