After the tumultuous year sound specialist Dolby Labs (NYSE: DLB), now might be a good time to review what happened that brought the stock down from almost $70 a share near the start of the year to around $31 a share today.

Reviewing what happened yesterday gives you a chance to decide whether it's still right for your portfolio today and whether it makes sense to buy more shares for tomorrow.

Sounds good
Although Dolby has its finger in many pies that improve the sound experience for end users, from sound systems to TVs, set-top boxes to the big screen, how it improves your computing experience has always been a key component of its growth objectives. I'll take a closer look at the events driving Dolby's stock this year.

Dolby Labs at a glance

Year-to-Date Stock Return (52.9%)
Market Cap $3.42 billion
Revenue, Trailing 12 Months $955.5 million
1-Year Revenue Growth 15.2%
1-Year Profit Growth 9.1%
1-Year Free Cash Flow Growth 18.8%
CAPS Rating (out of 5) *****

Source: S&P Capital IQ. Free cash flow growth is unlevered as provided by Capital IQ.

What happened to Dolby in 2011?
Although Dolby's shares were already under pressure over concern that Apple's (Nasdaq: AAPL) iPad was killing off the PC and Goldman Sachs downgraded the stock as a result, it wasn't until Dolby said Microsoft (Nasdaq: MSFT) might not include its codecs for DVD playback in the latest build of its Windows operating system under development that the retreat became a rout.

There's little doubt the Windows relationship was easy money for Dolby. Being preinstalled on just about every PC sold meant pocketing hundreds of millions of dollars in licensing fees, almost without thinking. But some analysts suggested that very few consumers actually used their computer for the sound quality, and Apple is doing quite well for itself despite not including a DVD player in its tablets.

Steve Ballmer had to be scratching his bald head wondering why Microsoft was spending millions on something that wouldn't be missed. If people want an improved sound experience, they might download an app to achieve it, or Dolby could sign up individual PC makers to include the codecs.

Now hear this!
Which is exactly what Dolby intends to do. From Acer to Dell (Nasdaq: DELL), Lenovo to Hewlett-Packard (NYSE: HPQ), the sound specialist will be going door-to-door selling its technology. Moreover, it will be an almost a liberating experience. Dolby will be able to offer OEMs an even better consumer experience with enhanced technological innovations. Instead of just DVD or Blu-ray playback, as is currently the case, Dolby will enable OEMs to play back the rich content in multichannel and render it in multichannel regardless of whether it's coming from Apple, Netflix (Nasdaq: NFLX), and (Nasdaq: AMZN) -- all of which have adopted Dolby's formats -- or your cable provider.

The world has been moving toward a post-DVD world for some time, and Dolby has been planning for that eventuality. So while it was something of a surprise that Microsoft would cut Dolby out of the loop now, it seems only to have advanced to planning closer to an even stronger revenue stream for the future.

Ready for a resurrection
No doubt Dolby is a company in transition, but one that will be even better able to capitalize on the opportunities coming. If it still sounds like a stock that carries too much risk, then read The Motley Fool's latest free special report that identifies its top tech stock for 2012. The report is free, but it's around for only a limited time, so check it out today.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.