He said while it was a good thing, he also implied that it wasn’t anything really special, saying that the company had “missed the boat” on its technology because “all of the equipment in the theater is still standard grade materials. The way that they’ve tuned the theater, which is very critical, is still following standard industry practice. So they have created for themselves a gain in one area which is great – it’s a great idea – but they haven’t followed through the rest of the equation.”
Bonnick thinks his company has an advantage over Dolby because of its custom equipment, and also because IMAX Corporation (USA) (NYSE:IMAX) technology provides an experience that enables “every loudspeaker to sound identical to the next loudspeaker in that room” which is key because of the way our brains pick up frequencies. He claims that IMAX Corporation (USA) (NYSE:IMAX), unlike Dolby’s Atmos, provides “full clarity of sound.”
IMAX Corporation (USA) (NYSE:IMAX) is much more than just sound, and with the largest research and development investment in the company’s history on a laser projection system, it will be moving into next generation technology. The laser projection will feature 4K resolution and be brighter while providing unprecedented clarity in picture. The new technology isn’t expected to be released until mid 2014, however. IMAX is looking to retain its leadership in visual cinema technologies, and Bonnick summed up its moat nicely when he stated that:
“[T]heater has always been our core business and as a company now we recognize that we have great brand power; great brand recognition.”
IMAX Corporation (USA) (NYSE:IMAX) also has other tricks up its sleeve as well, such as the world’s first integrated 3D digital camera.
While IMAX Corporation (USA) (NYSE:IMAX) is nowhere near as strong financially as Dolby, the company also seems to have better earnings quality with better, up-trending revenues:
Also keep in mind that IMAX is trading at over 40 times earnings, as opposed to Dolby’s price-to-earnings ratio of 16.
The bottom line
While Regal Entertainment Group (NYSE:RGC) looks a little risky and IMAX looks a little expensive, Dolby Laboratories, Inc. (NYSE:DLB) looks attractively valued now. The company is also positioned to capitalize from a successful blockbuster-filled summer. It definitely needs to ramp up its revenues and increase earnings along with them, but with literally no debt and a promising future with digital technologies such as Atmos and Dolby Digital Plus (found in mobile devices such as Kindles and smartphones), today’s troubled earnings may be just a speed bump in the long run. The company is in a transitional stage, and ingraining its Atmos technology into theaters is part of a promising start of this transition into the digital age.
The article Add Some Entertainment to Your Portfolio With This Stock originally appeared on Fool.com and is written by Joseph Harry.
Joseph Harry has no position in any stocks mentioned. The Motley Fool recommends Dolby Laboratories and Imax. The Motley Fool owns shares of Imax. Joseph is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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