TOKYO -- In February, after a long, expensive battle with Blu-ray over the format for next-generation DVD players, Toshiba Corp. -3.95% Toshiba Corp. Japan: Tokyo ¥438 -18 -3.95% March 14, 2014 3:00 pm Volume : 40.99M P/E Ratio 30.08 Market Cap ¥1856.07 Billion Dividend Yield 1.83% Rev. per Employee ¥30,793,400 03/13/14 Toshiba Sues SK Hynix Over All... 03/13/14 SanDisk Files Suit Against SK ... 03/13/14 Heard on the Street: Raising H... More quote details and news » Chief Executive Atsutoshi Nishida pulled the plug on the company's HD DVD business. The move surprised analysts. Japanese companies tend to look for acceptable compromises to save corporate pride, and the analysts had expected Toshiba to phase out the format quietly.

The defeat is a blow to Toshiba, a vast electronics conglomerate that makes semiconductors, appliances and nuclear reactors. The company saw HD DVD as a way to increase its presence in consumer electronics, where it is a relatively small player.

Mr. Nishida, who studied German political thought and joined Toshiba through an affiliate in Iran, is a different kind of manager for the tech giant, which has historically chosen engineers. He talked to The Wall Street Journal at his office about how he came to the HD DVD decision, his management style and how Toshiba intends to remain a player in consumer electronics. Excerpts follow:

WSJ: When did you first start thinking about withdrawing from the HD DVD business?

Mr. Nishida: When Warner [ Time Warner Inc. twx -0.16% Time Warner Inc. U.S.: NYSE $66.58 -0.11 -0.16% March 14, 2014 4:00 pm Volume (Delayed 15m) : 3.34M AFTER HOURS $66.58 0.00 0.00% March 14, 2014 4:24 pm Volume (Delayed 15m): 23,731 P/E Ratio 16.73 Market Cap $59.43 Billion Dividend Yield 1.91% Rev. per Employee $876,324 03/11/14 Disney in Talks to Acquire Onl... 03/09/14 '300: Rise of an Empire' Reign... 03/09/14 '300: Rise of an Empire' Fight... More quote details and news » 's Warner Bros.] announced its support for Blu-ray on the 4th of January. We took a little time before reaching a final decision, so we could give people a chance to voice their opinions and we could consider all the ramifications and consequences of pulling out, such as how it would affect consumers and us.

WSJ: Most industry observers had expected the format war to continue for a while longer. Why did you decide to pull out so quickly?

Mr. Nishida: I didn't think we stood a chance after Warner left us because it meant HD DVD would have just 20% to 30% of software market share. One has to take calculated risks in business, but it's also important to switch gears immediately if you think your decision was wrong. We were doing this to win, and if we weren't going to win then we had to pull out, especially since consumers were already asking for a single standard.

WSJ: Isn't the loss of the format war a blow to Toshiba's growth strategy?

Mr. Nishida: It was just one avenue of growth. It was one of 45 strategic business units that we have. This just means we now have 44.

WSJ: You announced the construction of two new semiconductor factories at the same time as the decision to quit HD DVD. Are you going to focus more on chips in lieu of HD DVD?

Mr. Nishida: No, the timing of that announcement was largely coincidental. The plans for the factories were already in the works, and I had said publicly that I would announce something by the end of February or March. When Warner made its surprise decision and changed the situation for the HD DVD business, it made sense for us to handle both at the same time rather than convene two separate special board meetings.

WSJ: Will you step away from the consumer electronics business now that you've lost the format war?

Mr. Nishida: No, we'll continue to sell standard DVD players, and we still have TVs and personal computers.

WSJ: Aren't you at a disadvantage with just standard DVD players?

Mr. Nishida: What people don't realize is that Hollywood studios are going to release new titles not just for Blu-ray but for standard DVDs as well, and there are a far greater number of current-generation DVD players out there. If you watch standard DVDs on our players, the images are of very high quality because they include an "upconverting" feature. And we're going to improve this even more, so that consumers won't be able to tell the difference from HD DVD images. The players would be much cheaper than Blu-ray players too. Next-generation DVD players are in a much weaker position than when standard DVD players were first introduced.

WSJ: How will you grow the consumer electronics business now?

Mr. Nishida: Without a next-generation DVD player, PCs become an even more important part of our strategy. We couldn't connect computers and televisions before, but now there is a technology that lets us do that. It's a wire now, but that'll eventually become wireless. That means that you can use the DVD player in your computer to watch movies on your big-screen television, and you don't even need a stand-alone player. The hard drive in computers also has a lot of capacity, so you can store videos and movies on it and use that as a player.

WSJ: Is Toshiba going to try to take control over the living room through computers?

Mr. Nishida: There was once a debate about whether the living room would be dominated by televisions or computers. Clearly, televisions are dominant, but computers can now be connected to them.

WSJ: Will you try to play a role in the video-downloading market?

Mr. Nishida: That's what we're hoping. We've been developing technologies in this area already, but now that we don't have the HD DVD business, I want to put even more energy into that.

WSJ: Your practical approach to management is unusual in Japan. How do you make it work in this country?


WSJ: Does a failure make you more risk-averse?


WSJ: Would Toshiba consider making more big acquisitions like the $5.4 billion purchase of the nuclear-technology company Westinghouse Electric Co. two years ago?

Mr. Nishida: It would depend on the situation. If it made sense, and we thought we could recover our investment within a certain time frame, then we might.

WSJ: How do spend your free time?

Mr. Nishida: My hobby is reading. I usually read six to seven books simultaneously on subjects like politics, economy, management, history and science in addition to novels. Two or three of them are usually in English. I just finished reading "The Future of Management." Right now, I'm reading Lawrence Lindsey's "What a President Should Know" and "Judgment: How Winning Leaders Make Great Calls."

Write to Yukari Iwatani Kane at