Piper Jaffray is out with a good call on Dolby (NYSE:DLB) noting Microsoft reported December quarter results last night and indicated that the mix of Windows [OEM] was 75% premium versions (including Vista Home Premium and Vista Ultimate). This is flat with the Sept. quarter, where Windows premium versions accounted for 75%; Vista premium versions were 72% of the mix in the June quarter. Firm believes as long as premium versions of Vista continue to make up the majority of Vista sales, it will benefit Dolby to a greater extent than is baked into Street estimates.
Over the last two quarters, Dolby has reported average revenue upside of 11% vs. Street and average EPS upside of 46% vs. Street. While the company has not provided a breakdown of upside contribution, PJ believes a significant portion (50%+) of the upside in each quarter was related to Vista premium sales.
In addition to Vista premium sales, the firm believes there are three catalysts that provide upside potential for Dolby in CY08: Digital TV, High Def DVD, and Digital Cinema.
Reits Buy and $55 tgt.
Notablecalls: UggTrader at NCN (Notable Calls Network) thinks DLB will rip higher after the open. He usually has a very good feel about these things. Let's see what happens.