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Dolby Laboratories (DLB) Signs Deal to Acquire GE Licensing

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Dolby Laboratories, Inc (DLB - Free Report) recently inked an agreement to buy GE Licensing, an intellectual property licensing business from GE Aerospace (GE - Free Report) .

GE Licensing is a leading innovator in patent licensing and management that boasts an extensive portfolio of intellectual property related to the consumer digital media and electronics sectors. Its legacy of a rich portfolio of patents and licensing, particularly in the realm of video codec technology, is noteworthy.

GE Licensing’s parent company, GE Aerospace (erstwhile General Electric Company), is a leading designer, developer and producer of jet engines, components and integrated systems for military, commercial and business aircraft. It has an installed base of roughly 44,000 commercial and 26,000 military aircraft engines.

The acquisition deal, valued at $429 million in an all-cash transaction, encompasses GE Licensing’s portfolio of more than 5,000 patents and includes foundational patents in standard essential video compression. However, GE Aerospace will hold on to GE brand’s trademark portfolio as well as core aerospace and defense technologies IPs inherent to GE.

The synergies between DLB’s existing licensing businesses and GE Licensing's portfolio of video codec technologies, including HEVC and VVC, are poised to elevate DLB’s intellectual property portfolio.

The deal is expected to close by the end of fiscal 2024, subject to the fulfillment of regulatory approvals and customary closing conditions. The acquisition will not have a material impact on Dolby’s financial performance in fiscal 2024.

DLB anticipates the acquisition to be accretive on a non-GAAP basis to operating margins and EPS in fiscal 2025.

Headquartered in San Francisco, CA, DLB designs audio and imaging technologies that revolutionize entertainment for user-generated content, TV shows, films, music and gaming. The company is focused on generating revenue from the licensing of consumer imaging technologies and audio and imaging technologies for world-class cinema offerings in collaboration with exhibitors.

The company’s performance is benefiting from the rapid adoption of Dolby Atmos and Dolby Vision. Management expects revenues from these businesses, along with imaging patents, to grow in high-single digits in fiscal 2024. However, softness across the licensing business and weak device sales continue to dent its financial performance.

In the last reported quarter, DLB’s revenues were down 3% year over year to $364.5 million. The top line beat the Zacks Consensus Estimate of $362 million.

DLB currently carries a Zacks Rank #3 (Hold) at present. The stock has lost 4.2% over the past year compared with the industry’s fall of 10.4%

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