A source at Toshiba confirmed an earlier report by public broadcaster NHK that it was getting ready to pull the plug.
"We have entered the final stage of planning to make our exit from the next generation DVD business," said the source, who asked not to be identified. He added that an official announcement could come as early as next week.
No one answered the phone at Toshiba's public relations office in Tokyo.
"There have been media reports that Toshiba will discontinue its HD DVD business," a Toshiba spokesman said.
"In fact, Toshiba has not made any announcement or decision. We are currently assessing our business strategies, but nothing has been decided at the moment."
But there's little doubt that the rumors have pleased investors. Bloomberg reports that Toshiba shares jumped 5.7 percent on the Tokyo Stock Exchange Monday, hitting a seven-week high. Sony's stock rose by 1 percent.
Whatever Toshiba decides, it is clear that support in the US for Toshiba's format has been eroding quickly. Wal-Mart, the nation's largest DVD retailer, announced Friday that it would stop selling HD DVD discs and machines in June. Earlier, Best Buy, the nation's largest electronics retailer, and Netflix, the largest online DVD rental service, each announced that they would be backing Blu-Ray.
Through 2007, the two formats were evenly matched. But some analyists say the tipping point came on Jan. 4, 2008, when Warner Bros. announced that it would move exclusively to Blu-Ray, leaving Universal and Paramount as the only remaining major movie studios to support HD DVD. With Warner's decision, Blu-Ray locked in about about 70 percent of the high-definition video market.
Toshiba responded by slashing prices on its HD DVD players to as low as $150. But that did not stop rumors that one of the format's biggest backers, Microsoft, could be jumping ship. The Australian tech site Smarthouse reported that Microsoft is working on a Blu-Ray Xbox 360 gaming console. The Xbox 360 currently supports the HD DVD format, while its competitor, the Sony Playstation 3, supports Blu-Ray.
For the general public, the end of the hi-def format wars could mean an end to consumer confusion. Reuters predicts that shoppers will be less reluctant to buy now that a clear winner has emerged.
The Blu-ray win means consumers seeking sharper movies on high-definition DVDs no longer have to choose between rival incompatible formats and run the risk of being stuck with a 21st century equivalent of Betamax -- Sony's videotape technology that lost out to VHS in the 1980s.
Having one format should also help accelerate the shift to the new technology in the $24 billion (12.3 billion pound) home DVD market.
Blu-Ray seems to have prevailed, but Wired magazine is not impressed. Their gadget blog argues that movie downloads will render the competition between disc formats "irrelevant":
This leaves Blu-Ray as the presumptive victor in the irrelevant optical disk format war. It now must face up to the real competition: the continuing success of DVD and the growing popularity of downloads, both on the internet and on-demand cable TV.