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DTS, Zoran, Intel, Dolby Laboratories and Sony

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  Published in House and Home on Wednesday, August 11th 2010 at 14:10 GMT by Market Wire
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CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: DTS Inc. (Nasdaq: [ DTSI ]), Zoran Corporation (Nasdaq: [ ZRAN ]), Intel Corp. (Nasdaq: [ INTC ]), Dolby Laboratories Inc. (NYSE: [ DLB ]), Sony Corp. (NYSE: [ SNE ]).

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Here are highlights from Tuesdaya™s Analyst Blog:

DTS Beats Marginally

DTS Inc. (Nasdaq: [ DTSI ]) reported second quarter 2010 results, with earnings decreasing 57.1% to 9 cents from 21 cents reported in the prior-year quarter. However, earnings per share beat the Zacks Consensus Estimate by a penny. The weak year-over-year results were primarily due to lackluster revenue growth and higher operating expenses.

Revenue

Revenues plunged 27.7% year over year to $17.5 million in the quarter, in line with the Zacks Consensus Estimate.

The year-over-year decline in revenues was primarily due to a $13.0 million decrease in royalty recoveries from intellectual property compliance and enforcement activities. This decrease in royalty recoveries resulted primarily from the settlement of legal matters with Zoran Corporation (Nasdaq: [ ZRAN ]) during the second quarter of 2009.

DTS achieved a strong growth in the car and Blu-ray markets during the quarter. Car market contributed 15.0% to quarterly revenues and posted 115.0% year-over-year growth.

Blu-ray contributed 25.0% to revenue growth and posted 29.0% year-over-year growth. Standalone players and game consoles achieved robust year-over-year growth rates of 139% and 153%, respectively. According to DTS, more than 50 million Blu-ray devices have been sold globally through the end of the second quarter.

DTS continues to experience strong contributions from markets that serve network-connected consumers, including television, personal computers and smartphones. In the reported quarter, these represented more than 15% of total revenue.

Standard definition home AV business decreased 7.0% in the quarter and contributed 30.0% of the total revenue. Broadcast contributed 5.0% to revenues in the quarter.

DTS has already developed partnerships with a number of companies such as Onkyo, Pantech, Intel Corp. (Nasdaq: [ INTC ]) and MSI, which will drive its top-line growth in the long term.

Outlook

For fiscal year 2010, DTS continues to expect revenues in the range of $81.0 million to $84.0 million, operating margins in the upper 20a™s and earnings per share in the range of 75 cents to 80 cents. Gross margin is expected to remain in the 97.0% to 98.0% range.

DTS expects SG&A and R&D expenses to continue to increase, primarily to provide support to new technology initiatives, international expansion and intellectual property enforcement.

Recommendation

We maintain a Neutral rating on a long-term basis (6 to 12 months). We believe DTS continues to gain market share based on its strong product portfolio, increasing online availability and accelerated expansion of the DTS technology into new form of market such as smartphones, portable devices and digital media players.

In the near term, weak Blu-ray unit growth and increasing operating expenses could suppress profitability. Further, DTS continues to face stiff competition from Dolby Laboratories Inc. (NYSE: [ DLB ]), Sony Corp. (NYSE: [ SNE ]) and privately held THX limited. Currently, DTS has a Zacks #4 Rank, which implies a Sell rating on a short-term basis.

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