Feb. 18 (Bloomberg) -- Toshiba Corp., whose HD DVD format is losing customers to Sony Corp.'s Blu-ray high-definition standard, rose to a seven-week high in Tokyo trading on speculation the company will abandon the unprofitable business.

Toshiba climbed 5.7 percent to 829 yen on the Tokyo Stock Exchange, a level not seen since Dec. 28. Toshiba is reviewing whether to completely end HD DVD production, said a person familiar with the plan, who asked not to be identified because the discussions are private, confirming a report by Kyodo news on Feb. 16.

The shares also rose after Nikko Citigroup Ltd. upgraded the stock, saying a withdrawal may add 50 billion yen ($464 million) to earnings next fiscal year. U.S. retailers said last week they'll stop selling HD DVD products after Warner Bros. Entertainment, the top DVD publisher, sided with Blu-ray.

``Quitting would be positive for Toshiba in the mid- to long-term as it can back out of the business before the wound gets any deeper,'' said Mitsushige Akino, who oversees about $560 million in assets as chief investment officer at Ichiyoshi Investment Management Co. in Tokyo.

The company should focus on more profitable businesses such as semiconductors and industrial electronics, he said.

Tokyo-based Toshiba said today in a statement no decision had been made, after the Asahi newspaper reported the company may make an announcement this week.

Sony Shares Gain

Toshiba's operating losses in the business will probably widen to 55 billion yen in the year to March 2009, from 50 billion yen this fiscal year, Hiroyuki Masuko, an analyst at Nikko Citigroup in Tokyo, wrote in a Feb. 15 report. He raised his recommendation on the company to ``buy'' from ``hold'' today following the report of a potential withdrawal.

Goldman, Sachs & Co.'s Tokyo-based analyst Ikuo Matsuhashi and Mizuho Securities Co.'s Koichi Hariya also said in separate reports quitting would bolster earnings at Toshiba.

Wal-Mart Stores Inc., the world's largest retailer, on Feb. 15 said it will phase out Toshiba's standard in favor of Blu-ray, citing customer preference. Netflix Inc. and Best Buy Co. said earlier this month they would also stop selling movies using Toshiba's HD DVD format.

The retailers abandoned the standard following last month's endorsement of Blu-ray by Time Warner Inc.'s Warner Bros., a decision that Macquarie Group Ltd. analyst David Gibson described at the time as being ``game over'' for HD DVD.

Remaining Partners

Warner had joined Walt Disney Co. and News Corp.'s Fox in backing Blu-ray exclusively. The two major studios that continue to use the Toshiba format are Viacom Inc.'s Paramount Pictures and General Electric Co.'s Universal Pictures.

Blu-ray has won the support of 70 percent of Hollywood companies, Yoshiharu Izumi, a Tokyo-based analyst at JPMorgan Chase & Co., wrote in a report today. He has an ``overweight'' rating on Toshiba and Sony.

The HD DVD format is supported by a promotion group chaired by Toshiba whose members include Microsoft Corp. and Intel Corp., while Sony's Blu-ray is backed by companies such as Samsung Electronics Co. and Matsushita Electric Industrial Co.

Sony's stock rose 1 percent to 4,900 yen, compared with a 0.1 percent gain by the benchmark Nikkei 225 Stock Average. Sony spokeswoman Masayo Endo declined by telephone to comment.

A single-sided, single-layer Blu-ray disc can store 25 gigabytes, compared with 15 gigabytes for HD DVD and 4.7 gigabytes for a conventional disk, according to the Nikko Citigroup report. The HD DVD disks are cheaper to produce because their structure resembles the preceding technology more closely, it said.

Victor Co. of Japan Ltd. introduced its VHS-format home video recorder in 1976, beating out Sony's Betamax as the standard for home video use two decades ago.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.

Last Updated: February 18, 2008 04:31 EST