Dolby Laboratories, Inc. (NYSE:DLB)

CAPS Rating: 4 out of 5

Dolby Laboratories develops and delivers innovative products and technologies that make the entertainment experience more realistic and immersive.


Player Avatar Lituus (89.28) Submitted: 9/6/2011 6:55:08 PM : Outperform Start Price: $28.84 DLB Score: -20.58

I am thrilled to be putting a bunch of cash to work with Dolby right now. $32 bucks a share? Okay, so potentially losing 25% of revenue via Windows seems dire but if you read the details it looks like they will still be able to get much of the PC revenue, just via different partners (though likely at lower margins). The upside is also in mobile devices and home entertainment systems and these markets will eventually eclipse PCs.

Member Avatar Jognils (93.66) Submitted: 9/15/2011 11:56:28 AM
Recs: 0

I agree, although switching back to selling to software vendors and OEMs could actually improve margins rather than deteriorating them, simply because Microsoft's buyer power has allowed it to pay Dolby lower royalties per unit for Windows Vista and 7. Here's an excerpt from the 2010 10-K:

"The inclusion of our technologies in Windows 7 Professional and Enterprise editions could result in our technologies residing in a greater percentage of PCs, though the benefit from this potential significant increase in reported units will be partially offset by substantial discounts, thereby reducing the average per unit royalty we would receive from Microsoft over time."

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