Yowza: Toshiba's net profits plunge 95% thanks to HD DVD, flash prices

A year ago today Toshiba was announcing ¥26.17 billion in profits for the quarter. Today, just ¥1.25 billion or about $12 million. In addition to the $580 million hit on account of its withdrawal from HD DVD, Toshiba also saw a swift decline in flash memory prices. While bad news for Toshiba on all accounts, we consumers are basking in a market dominated by a single high-def optical disc standard and cheap NAND and DRAM pricing. Sorry Tosh, but you won't find any tears around here.

[Dani @ Apr 25th 2008 5:19AM]

Oh don't be mean, poor Tosh.

I'll give them a virtual cuddle.

[Ebzy @ Apr 25th 2008 6:53AM]

Engadget is also mean to me.

Can I have a cuddle too...

[Bernhard @ Apr 25th 2008 7:48AM]

Nah, you need a HD-DVD drive for one.

[Tim @ Apr 25th 2008 7:49AM]

@ ebzy: maybe if you layed off the cheeseburgers in your avatar you wouldn't be begging a girl on a comment board for "a cuddle" . . . just sayin'

[John @ Apr 25th 2008 8:52AM]

Judging from the picture, I think Toshiba would politely decline your offer and seek sympathy elsewhere.

[OVerclockerX @ Apr 25th 2008 5:30AM]

I thought I felt a tremor, must have been that huge crash

[Zorque @ Apr 25th 2008 5:31AM]

That's... astounding. A lot of people are gonna be pissed to log into Etrade or whatever and find this waiting for them. Of course if they were smart investors they probably would have sold right before HD-DVD died.

[gad get @ Apr 25th 2008 5:47AM]

Course, if they were really smart investors, they'd have just skipped investing in any of those involved in the high-def format war to begin with.

[Esat Dedezade @ Apr 25th 2008 6:02AM]

I concur with gad...get.

Although the biggest rewards come with the biggest risks, its a coin toss between how much you are willing to risk for how much gain.

[DrXym @ Apr 25th 2008 6:55AM]

The market is not stupid. I expect if you looked at Toshiba stock it would have been dipping for months in anticipation of this. If my memory serves me correctly, stock actually rose after they announced HD DVD was dead because the market knew the format was hanging around their neck like a dead albatross. Cutting the format loose means that investors don't expect these losses to continue.

More concern to the market would be Toshiba's ongoing operations such as chip production. They still have the potential impact future earnings and Toshiba will just have to ride it out just like the rest of the industry.

[omf @ Apr 25th 2008 10:45AM]

"The market is not stupid."

Ummm... have you been paying attention to what The Market has been up to the last few years?
http://en.wikipedia.org/wiki/Subprime_mortgage_financial_crisis

[G Kabik @ Apr 30th 2008 4:30PM]

@ omf

The market wasn't nearly as responsible for the recession as the credit rating agencies that kept bolstering the trustworthiness of failing lenders. In this case the market wasn't "stupid" so much as it was "tricked". You can be cynical about the market all you want, but they got shafted almost as badly as the folks who got sold bad loans backed by (once again) b.s. credit ratings.

And yes, in this context the market is actually not stupid enough to not have anticipated this from Toshiba ages ago when it was clear that HD-DVD was fighting a losing battle. Anyone who still has money in Toshiba deserves their losses.

[j3oomerang @ Apr 25th 2008 6:01AM]

thats not bad at all, surprised they even made profits considering the fall of HD-DVD

[Rich @ Apr 25th 2008 6:08AM]

I think it's remarkable that they didn't make a loss. They must be doing something right.

Compare that to Motorola.

[DrXym @ Apr 25th 2008 6:13AM]

This is a one time hit. Toshiba will get over it. The market probably expected a bad quarter when the bad news started in January and have adjusted already.

[threenine @ Apr 25th 2008 6:27AM]

Yeah...because BD is so consumer friendly and cheap right? Just the news please...not your very uneducated opinion.

[Matthew @ Apr 25th 2008 6:32AM]

aww, someone here bought a $99 HD-DVD player and is bitter.

[DrXym @ Apr 25th 2008 6:50AM]

BD is more consumer friendly than HD DVD, not least because you can obtain hardware from over a dozen manufacturers, not just one. And the price of hardware reflects competition, supply and demand etc. Prices will drop over time just as they did with DVD.

HD DVD only appeared cheap because Toshiba massively subsidized the players to make them appear so. But the format still tanked and players went even cheaper only because they were on firesale. Toshiba lost so much money is precisely because they were subsidizing their players to capture the market.

[Neoprimal @ Apr 25th 2008 7:11AM]

Actually I'm inclined to agree with three. I mean, personally when you look back, HD DVD never lost as a format or standard, it lost purely because of politics and Sony's marketing power. Sony bought people off left, right and center and made lots of deals in order to get various partnerships. There's no fussing with that, alls fair in the game of competition and when you're waging a format war...even more so.

I don't think BD is that friendly - f'ing early adopters so hard their families felt it aside, noone else finds it odd that they released the PS3 with hardware that is completely upgradeable, but 900-1000 dollar disc players even AFTER the PS3 that are now almost just as useless as hd dvd players are currently? A variety of vendors shouldn't be used to justify this, as if HD had 'won', it would be 'friendly' using that logic.

HD DVD was well thought out and planned with the consumer in mind. Everything was built into the players from the getgo, and they were all upgradeable from day 1.
BD is more with the sellers in mind, imo.

[Geir E @ Apr 25th 2008 8:14AM]

bd players after ps3 useless? profile 2 you think of? you really think people feel their players is as useless as a player for a dead format just because they dont get a couple of extra features?

[DrXym @ Apr 25th 2008 8:35AM]

@Neoprimal, perhaps you don't remember or weren't involved but when DVD launched, the cost of players was high too. My first player (not even a 1st gen player) cost £550. Why are you seriously expecting Blu Ray to be any different? No one is putting a gun to early adopter's heads and forcing them to buy. They either do or they don't on their own terms and their own reasons. Prices fall over time as the format takes hold, economies of scale kick in and costs diminish.

HD DVD was "cheap" because Toshiba monopolized the format. Their only hope of beating off the industry-wide Blu Ray consortium was to sell as many players as possible and hope to capture enough share that BD would fizzle out. So they slashed prices and hoped for the best. They slashed prices so much that even an OEM branded version of their A3 design cost more than the A3 did. That shows you why the CE industry treated the format like dogshit - there was no money to be made when Toshiba even undercut its own OEM partner.

CE's aren't pricing BD players so high for no reason at all. It's a tradeoff between cost of production, currency rates, R&D, competition, marketing, and the price consumers are willing to pay. As competition increases (and it's increasing substantially), prices will fall. Every CE has new models coming out in the next 3 or 4 months and doubtless there will be a few cheap Chinese no-names before long too. Take your pick.

As an aside you claim Sony "bought people". Possibly so, but don't forget Toshiba and Microsoft did their share of buying too. Toshiba were not some innocent little flowers that were trampled on. Their hands are as dirty as anyone elses.

[kuromiko @ Apr 25th 2008 9:57AM]

@Neoprimal:

I wouldn't necessarily call it buying people off, I'd call it "ensuring their customers had the highest amount of content possible".

You can also take a look back and see that Blu outsold HDDVD every week after November '06. More PEOPLE bought Blu-Ray.

You should probably point the finger at the PS3 before pointing it at Sony buyoffs. The PS3 launch window was easily a million players in homes when HD-DVD hadn't even half the install base to begin with.

[Zeus.:God @ Apr 25th 2008 10:17AM]

I couldn't have said it better myself, Neoprimal.

Miko, they weren't "ensuring" anything for the customer- they were making damned sure they didn't create another abysmal failure. Blu-Ray may be technically superior, but for the consumer, it was not.

[threenine @ Apr 25th 2008 2:50PM]

I was mainly referring to the absolutely sinister DRM schemes found in the BD protocol vs. HD DVD. Practically everything about HD DVD was more consumer friendly, even on the authoring side.

[G Kabik @ Apr 30th 2008 4:38PM]

Neoprimal is right here, we tend to think of competition as naturally providing the "best" alternative for the consumer, but in this case in the end the winner (right or wrong) was not decided based on the actual technology, but on who owned content distribution rights, something which is completely unrelated to the quality of the format or the hardware themselves. This isn't a victory for the strongest product as much as it is a victory for the most powerful, most deeply connected business. Maybe BD is better than HD-DVD, or maybe HD-DVD is better than BD. But that question is moot, because that wasn't the deciding factor in this war at all.

[tekdroid @ Apr 25th 2008 6:57AM]

Toshiba, I love you. You know why? This ultra-rare bit of truth on the back of your USB Flash Memory packaging (that sold in Australia and elsewhere no doubt):

* With the passage of time or after extended use, the reading, writing and deleting capabilities of the Product will eventually fail.
-------

Never in my life have I seen such an honest portrayal of the (grim!) realities of a flash memory stick portrayed so bluntly by a company with vested interest in selling said product to its customers.

My hat off to you for your absolute ruthless truth in marketing. It's such a rare things these days, I almost did a semi 'wtf?' after reading it.

AUD $12 well spent :)

Love,
tekdroid
PS. Shame about the financials. Chin up.

[Nicnac @ May 1st 2008 5:18PM]

re: tekdroid comments about Toshiba honesty in labeling.

Microsoft is always honest like when they tell us the x-box is going to be the most reliable console on the planet. Or when they tell us Vista has sold above expectations and users are loving it.

Sony is always honest like when they had stellar movie ratings given by non-existent reviewers. And now, with them giving consumers a superior high-def format with more secure DRM, region controls, unfinished specs, interim video port formats, etc.

The catch phrase of our generation is "we continue to innovate"

[mattclarkie @ Apr 25th 2008 7:00AM]

Those people in the city are a bunch of idiots, and unfortunately they have some of my money, even investing it in Asia but not Japan, way to go city boys.


As far as I am concerned any company making a profit is a sound investment as long as the profits are regularly decreasing, this was a one time dealy.

[mattclarkie @ Apr 25th 2008 7:02AM]

As far as I am concerned any company making a profit is a sound investment as long as the profits aren't regularly decreasing, this was a one time dealy.

[aardvark sandwich @ Apr 25th 2008 7:59AM]

http://farm3.static.flickr.com/2327/2423035895_58c7727a52.jpg?v=0

[Coolone3000 @ Apr 25th 2008 9:28AM]

I shed a tear for Toshiba, now Blue-Ray prices have stalled at the $400 mark, wonder why that is hmmmmm.......

[Magallanes @ Apr 25th 2008 11:56AM]

Is the success of the evil master plan to conquest the (digitial video) world.

"..Before each night is done
Their plan will be unfurled
By the dawning of the sun
They'll take over the world..."

[Zeus.:God @ Apr 25th 2008 10:19AM]

I don't know... Price gouging?

[Zeus.:God @ Apr 25th 2008 10:26AM]

In response to Coolone3000

[Dave @ Apr 25th 2008 10:39AM]

LOL i am not sorry for them :)

[Magallanes @ Apr 25th 2008 11:50AM]

HD-DVD fiasco and yet to obtain a 5% profit. I think that it's not so bad after all, it's way better to bankruptcy.

[jimmy1080 @ Apr 25th 2008 11:30PM]

Sony bought this victory. Toshiba's mistake was not planning enough $$ to buy off the studios. Simply staying out of the red for this quarter was a win, IMO.

[kamm @ Apr 26th 2008 3:19PM]

"BD is more consumer friendly than HD DVD, not least because you can obtain hardware from over a dozen manufacturers, not just one. And the price of hardware reflects competition, supply and demand etc. Prices will drop over time just as they did with DVD."


Ahhhahaha, talk about being a clueless BD-moron.

[kamm @ Apr 26th 2008 3:19PM]

"I was mainly referring to the absolutely sinister DRM schemes found in the BD protocol vs. HD DVD. Practically everything about HD DVD was more consumer friendly, even on the authoring side."

Absolutely correct! Too bad very apparently few on this board has any clue about the subject so they revert to monkey-pasting crap they've been spoon-feed with by either of the camps.
You can't expect these people, like Xym, to grasp it, even less accept it - hey, they think cheap prices are bad (anyone could start making HD DVD players, remember) while higher prices are good, especially when it's enforced by a cartell, in this case the BD mafia.
Classic clueless, twisted fanboy mantra.
God, I hate fanboys, especially dumb ones.