Sony shares surge on HD-DVD demise

Sony's shares gained nearly 5 percent recently on news that Toshiba will be bowing out of the latest movie format wars, reported Reuters. The announcement that it will cease production of HD-DVD players before the end of April leaves Blu-ray, which is integrated into the PlayStation 3 console, as the victorious format.

Sony's stock in the US hit a high of US$47.07 this week on the New York Stock Exchange, before dropping slightly to US$46.96, up US$2.18 or 4.87 percent from Friday's close.

Analysts agreed that the demise of HD-DVD was a boon for Sony and could ultimately be bad news for Microsoft's console. William Blair & Co. analyst Ralph Shackart said that "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".

Wedbush Morgan Securities' Michael Pachter told CNET that he agreed. He said: "Educated consumers who have been holding off buying on the format war to make a decision will now probably buy a PS3. Uneducated consumers who have no idea that there was a format war are likely to get pushed to buy a PS3 by sales clerks. Retail sales clerks being what they are, they are now really, really going to push sales of Blu-ray, and therefore the PS3."

Pachter believes that by the end of this year's holiday season, the PS3 is likely to now emerge victorious in the console war. He told CNET: "The real problem for the 360 is that very few people will buy a 360 and a PS3. So therefore, every PS3 sale will likely mean that person won't buy a 360, so this news will ultimately hurt 360 sales. But I don't think it will hurt the Wii. If I had to bet, I'd say Microsoft gets no more than 30 percent of the total install base, and Sony and Microsoft slug it out, and Sony will ultimately prevail."