Dolby Increasingly Eyes Mobile to Offset CE, PC Downturns

Dolby Labs scaled back its full-year revenue forecast at the high end from $950 million to $940 million due to a maturing in the digital cinema conversion cycle and lowered projections of PC revenue following recent market data, said Chief Financial Officer Lewis Chew on the company’s fiscal Q2 earnings call Thursday.

Dolby had previously projected its 2013 PC licensing revenue would be $910 million-$950 million based on industry forecasts predicting PC revenue would be down 4 percent for the year, and that industry falloff “is pushing up closer to 10 percent,” he said. PCs represented 26 percent of Dolby’s total licensing revenue for the quarter, down 2 percent sequentially and 4 percent over fiscal Q2 2012, Chew said, citing a “decreasing unit trend in the overall PC market."

One “encouraging” sign in the PC market, Chew said, was in product mix. Dolby technology attached to higher-priced PCs with optical disc drives, he said. CE revenue for Dolby’s fiscal Q2 comprised 15 percent of total licensing, Chew said, down 5 percent sequentially on lower amounts collected for back payments and lower Blu-ray unit sales. The same drivers affected year-over-year revenues that fell 25 percent, with lower unit volume on DVD players and home theater in a box, he said.

Mobile revenue, representing 10 percent of total licensing volume, grew 10 percent sequentially and 32 percent over fiscal Q2 2012, Chew said, with Dolby technology being adopted for more tablets and smartphones. CEO Kevin Yeaman cited industry data forecasting smartphone and tablet shipments of 900 million units this fiscal year, calling the segment “a significant growth opportunity.” Dolby achieved design wins in Windows 8 tablets and PCs in fiscal Q2, with Netflix now sending Dolby-enabled content to select Windows 8 devices, Yeaman said. Dolby technology is in roughly a quarter of Android smartphones and tablets and Kindle Fire HD users can receive Amazon Prime content in Dolby sound, he said. Yeaman said Dolby is laying the foundation for its technology in the IC and developer communities, too, with Qualcomm now shipping the Dolby-enabled Snapdragon 800 chipset “making it easier for OEMs to support our format in their handsets.” Dolby has launched a Windows 8 program to help developers build applications supporting Dolby premium audio, he said.

On coming technology, Yeaman said Dolby is demonstrating Dolby 3D to content creators and OEMs as a glasses-free solution for 3D. The Cameron Pace Group, led by James Cameron and Vince Pace, said earlier this month it would integrate the format into its 3D video production workflow (CED April 10 p16). Dolby 3D is a delivery format, encompassing encoding and decoding, and will be implemented on silicon in partnership with OEMs, Yeaman said. Royalty fees from Dolby 3D will follow traditional Dolby royalty models, he said.

Dolby reported revenue of $249.3 million for fiscal Q2 2013 ended March 29 compared with $262.8 million for fiscal Q2 2012. Licensing revenues slipped from $227.8 million to $226.5 million, the company said. Dolby shares closed 3.8 percent higher Friday at $33.58.