SRS Making Sound Advances

SRS Labs (SRSL - Snapshot Report) has announced that its SRS Premium Sound is gaining popularity with several leading computer manufacturers such as Asustek Computer, BenQ Corporation, NEC Corporation, AOC Corporation (AOC - Analyst Report), MSI Computer Corp. and Samsung.

Management reported that an increasing percentage of laptop computers, net books and all-in-one PCs for the Asian market were being equipped with SRS Premium Sound. The product was developed with the PC market in mind, where design constraints usually result in poorer sound quality when compared with entertainment devices.

SRSL's first quarter results were very strong, with the computing segment alone growing 80.8% sequentially. We expect the company to continue seeing significant growth, driven by increasing licensing revenue from BenQ, NEC and Hewlett-Packard (HPQ - Analyst Report) through the rest of the year.

The company also saw home entertainment revenue increasing 17.9%. Compare these results with audio giant Dolby Laboratories (DLB - Snapshot Report), which saw licensing revenue grow a mere 3.8% in the last quarter. SRS's size, of course, is not comparable to Dolby's. Dolby has its own Asia strategy, where it is teaming up with Chinese electronics manufacturers such as Lite-On IT, TCL Technology Electronics and MIT Technology to improve Blu-ray disk production in China.

This could be a good way to gain share in the rebounding Chinese consumer market. DTS (DTSI - Snapshot Report) started early in Asia, and is another strong contender for market share.

The PricewaterhouseCoopers Global Entertainment & Media Outlook 2009-2013 was released last month. Consumer spending on entertainment and media has been significantly hurt by the recession, with the overall segment expected to decline 1.2% in 2009, stay flattish in 2010 and grow a mere 3.2% in 2011. There remain pockets of brightness, however, that continue to show growth opportunities.

Latin America and the Asia-Pacific region will be the major growth drivers, growing at a CAGR of 5.1% and 4.5%, respectively through 2013. Excluding Japan, the Asia Pacific belt is expected to grow 7.1%. Companies focusing on these areas are likely to outperform the broader market.