Toshiba takes $1 billion hit on HD DVD pullout

Although Toshiba’s shares initially rose on the news it was to ditch HD DVD, the company will ultimately be taking a major hit due to the demise of its next-gen disc format, according to a report from the Nikkei business daily.

What was expected to be a few hundred million dollars in charges will now be closer to $1 billion, due to higher production line changes and other costs related to pulling the plug on HD DVD. But while a considerable blow, analysts believe Toshiba’s exit from the format war will actually lessen the potential damage in losses from HD DVD operations and improve the company’s profitability between $398 million and $498 million a year.

All in all, HD DVD’s defeat will definitely clear up much of the consumer confusion over rival high-def formats. Unfortunately, it has also sparked an increase in prices for Blu-ray players, as they now have no competition to worry about – well, at least not from another physical format but they still face challenges on other fronts.