Consumer-sound technology company Dolby Labs (NYSE:DLB) will report first-quarter 2007 financial results on Feb. 1. Let's hear what the analysts are saying.

What analysts say:

  • Buy, sell, or waffle? Nine analysts cover Dolby wall-to-wall, and while three say buy, six say hold.
  • Revenues. Revenues are expected to jump 13% to $103.2 million for the quarter.
  • Earnings. Profits, meanwhile are projected to grow 25% to $0.20 per share.

What management says:
Many have fretted over the decline of the DVD as it will affect Dolby (the company's technology is the standard on all players), particularly since the delay in the next generation of high-definition DVDs (Blu-ray or HD-DVD). But the company was able to surprise analysts last quarter by significantly expanding its brand and products around the world. Moreover, as high-definition TVs became more ubiquitous last year, it offered at least some comfort to know that Dolby was again a standard for the new tuners mandated for introduction this year.

Of course, the Chicken Littles also worry that movies-on-demand on TV will eventually harm the Motley Fool Stock Advisor pick's profit picture, but its licenses are embedded in the TVs themselves and in the surround-sound systems with which people listen to them. Dolby's technologies are also used by the people actually making the movie. So any lessening of the revenue stream from DVDs seems likely to be shored up with these other venues.

What management does:
Even though Dolby Digital is pretty much a household name in the U.S., the company derives most of its revenues -- from both licenses and products -- outside of the country. More than three-quarters of its licensee revenue comes from international customers, while nearly two-thirds of products sales do. Yet it's the licenses that generates the most cash for Dolby, accounting for more than 75% of total revenues. They also have the highest margins, which have been steadily improving.

Margin

09/05

12/05

03/05

06/06

09/06

Gross

75.6%

77.5%

80.9%

80.4%

80.9%

Operating

29.3%

27.0%

32.6%

32.3%

37.1%

Net

15.9%

17.7%

21.7%

22.0%

22.9%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
It's tough not to like this company. As new sound technologies emerge, it's to Dolby that the standard is given. Of course, competitor DTS (NASDAQ:DTSI) also gets dual billing on many of the products, but when people think of sound technology, it is Dolby they envision. That bodes well for both the coming quarter and future quarters. While international markets bring in more revenues as a whole, it's still from the U.S. that the company derives the most money from a single source. That means there are still plenty of opportunities to penetrate global markets with its brand and should allow the company to continue to meet or exceed expectations.

Competitors:

  • DivX (NASDAQ:DIVX)
  • Eastman Kodak (NYSE:EK)
  • Q Sound Labs (NASDAQ:QSND)

Related Foolishness:

Dolby Labs has earned a four-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the stock rating service by joining today. It's free!

Dolby is also a recommendation of Motley Fool Stock Advisor. A 30-day guest pass gives you full access to the high-volume reason why it made the cut and is beating the market.

Fool contributor Rich Duprey owns shares of Dolby Labs but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.