A Long-Shot Bet on the Video iPod (AAPL, SRSL)

Includes: AAPL, SRSL
by: David Jackson

SRS Labs (NASDAQ:SRSL) is a provider of surround sound audio technology to manufacturers of flat panel displays, set top boxes, and car and home audio gear. CEO Thomas Yuen made the following comment on the SRS Labs' recent conference call:

The portable media device market is undergoing a transition. As iPod from Apple continues to gain market share, manufacturers are shifting production from Japan and Korea to China, as the price pressure for lower cost MP3 music players continues.

Video is becoming a key component to new portable devices. We have launched SRS Mobile HD, which is a complete solution for audio, video, headphone and surround sound playback.

Thus far, we have not been able to penetrate the Apple opportunity. However, rest assured that our sales force will continue to pursue this account. In the meanwhile, the popularity of the portable media player market has created a sizeable accessory market that makes a variety of items including products such as docking stations and headphones. We have received confirmation of design wins with a growing number of new customers in this accessory market.

(Excerpts from the SRS Labs conference call transcript.)