Leading provider of high-definition audio solutions, DTS Inc. (DTSI), recently acquired Manzanita Systems. However, the financial details of the deal were not made public.
Founded in 1996, Manzanita Systems offers software to perform audio and video compression for broadcasters, post-production houses, manufacturers of digital video technologies and military and defense contractors.
We believe that the Manzanita acquisition will improve DTS’s position in the network-connected media ecosystem. It is expected to beef up the company’s product offerings for television, mobile devices and PC streaming services. This will help the company to attract higher number of users, thus driving growth in the near future.
In the past too, the company made accretive acquisitions to bolster its offerings. In 2012, DTS had acquired California-based SRS Laboratories to boost its audio-processing technology.
DTS continues to gain market share driven by its strong product portfolio, robust growth from the Blu-ray market and increasing penetration into network-connected devices, such as Internet-enabled television, smartphones, personal computers and portable devices, going forward.
Moreover, the company’s extended partnership programs with Samsung to provide sound solutions for TV and inclusion of its technologies in Qualcomm’s (QCOM) latest generation of processors are positives for the company. This apart, partnerships with mobile and tablet makers such as Hewlett-Packard (HPQ), Toshiba, Huawei, Pantech, Lenovo and Panasonic are also encouraging.
Further, the recent integration with Gigabyte to integrate DTS Studio Sound into their latest GSmart smartphone, GX2 is a major positive.
However, we believe that the strong growth of network-connected devices will eventually cannibalize the sales of DVD and Blu-ray based products. This in turn will hurt DTS' growth over the long term. Further, the company faces significant competition from Dolby Laboratories Inc. (DLB), Sony Corp. and privately-held THX Limited, which will impact its future profitability.
Currently, DTS sports a Zacks Rank #1 (Strong Buy).
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