Wednesday, April 30, 2008

one to consider - dlb

This morning, Dolby announced that the Japanese consumer electronics company Toshiba would be the first company to integrate the new Dolby Volume technology into products that will be on the market. Dolby Volume equalizes differences in volume between different audio sources. The volume that a DVD player puts out may be different from the volume put out by a television channel or radio station; this requires consumers to change volume levels any time they change what they're listening to or watching. Dolby Volume aims to fix that by keeping audio levels consistent.

Given that Toshiba is integrating the technology into just four LCD television models, we don't expect much of a financial impact on Dolby. However, the move does help validate the technology, and it could result in other electronics makers considering it for use in their products.

As for Dolby's earnings results, analysts expect the company to deliver earnings of 42 cents a share on revenue of $159 million. Typically, expectations for Dolby are rather high, given that the company regularly delivers upside surprises of stunning magnitude. However, with the economic slowdown, investors have taken a more cautious view of the stock, given its exposure to consumer spending. While slowing consumer spending certainly wouldn't be a good thing for Dolby, I believe the company is well- positioned to continue delivering excellent quarterly results.

The consumer electronics categories that Dolby depends on remain in very good shape. According to the results I've seen from the likes of Best Buy, Circuit City, Microsoft, Intel and Corning, consumer demand for key Dolby product segments such as notebook PCs, high-definition televisions and gaming consoles is holding up just fine. Therefore, I have confidence that Dolby will beat expectations, especially given that analysts have been cutting their earnings estimates in recent months.

No comments: