DVD surrender a black eye for Toshiba star

Bad news never seemed to faze Yoshihide Fujii, the gregarious head of Japanese electronic conglomerate Toshiba Corp's (6502.T) consumer electronics business.

Ask him about slow sales of high-definition HD DVD players in North America -- the DVD format Toshiba pulled the plug on Tuesday -- and he would talk about demand for HD DVD drives piggy-backing on Toshiba PCs.

Question who would pay the 398,000 yen ($3,700) price tag for a HD DVD recorder, and he would say, "I would buy this product even for 1 million yen".

But Fujii's tough talking stopped abruptly after Time Warner Inc's (TWX.N) Warner Bros studios defected in January from the HD DVD camp and said it would only put high-definition editions of its movies on the rival Blu-ray format pushed by Sony Corp (6758.T) and Matsushita (6752.T).

The next day, Fujii axed a trip to the Consumer Electronics Show in Las Vegas and a HD DVD promotional event. Warner Bros' huge film library meant 70 percent of Hollywood was now backing Blu-ray and pundits predicted the end was nigh for HD DVD.

"That's not the Fujii-san I know," said a Sony official, who described Fujii as a "tenacious and charming" builder of alliances who helped seal an earlier partnership with Sony to build the Cell microchip, now used in Sony's PlayStation 3 game console.

Fujii was a star in the microchip division for Toshiba, a conglomerate whose products range from nuclear power stations to refrigerators.

But success did not follow when he switched to the lackluster consumer electronics division in 2004 to head Toshiba's search for a hit product like Apple's (AAPL.O) iPod.

The alliance builder, who also masterminded a joint venture with Canon Inc (7751.T) in ultra-thin SED TVs, since scrapped, may have been shackled by long-standing antipathies toward Sony among Toshiba's consumer electronics engineers, one Toshiba engineer said.

In a company where rivalries and grudges divide even the thermal energy and nuclear energy teams that both build power stations, Fujii was always seen in his new division as an outsider tainted with cooperative ties with Sony, the engineer said.

Whatever the reason, negotiations over a unified next-generation DVD format broke down in 2005, and Toshiba turned to Microsoft Corp (MSFT.O) for support -- a move analysts and proponents of Blu-ray blame for needlessly postponing HD DVD's defeat.

"The content is what determines what format will win, and for long time, the vote had been overwhelmingly for Blu-ray," said Macquarie analyst David Gibson.

But Fujii, raised in the microchip industry where the strategy is to invest more when things get rough, would have been the last man to admit defeat.

In June, when Toshiba said it was lowering its sales targets for HD DVD players in North America, he told reporters, "From the turnout today, I'm guessing you all thought we would announce the defeat of HD DVD. But I am here to tell the truth...The real fight starts now."

For all the tough talk, things fell apart for the HD DVD format camp after Warner Bros' defection. Big U.S. retailers followed suit, forcing Toshiba to pull the plug.

The end of HD DVD follows the firm's abortive moves into two types of high-tech TVs -- SED (surface-conduction electron-emitter display) and OLED (organic light-emitting diodes) -- and adds more dents to Fujii's reputation for a golden touch.

"This new product is packed with the dreams and passions of Toshiba's engineers and all employees," he said when unveiling Toshiba's first HD DVD recorders in 2006.

Now that dream is over, and the company must decide where it wants to go in its search for a star consumer product.

($1=107.79 Yen)