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DTS Expands in Asia

Zacks Equity Research

Asia continues to be an important growth hub for DTS Inc (DTSI). The entertainment software provider recently announced a couple of new partnerships with KKBOX and QQ Music, which will help it to penetrate further in the emerging markets of Asia.  

KKBOX is a leading provider of digital music and its library comprises 10 million music tracks from more than 500 local music labels and publishers. DTS recently entered into an agreement with KKBOX to integrate the music service with its Play-Fi app for Google’s (GOOG) android-based devices.

The integration will help customers in Asia to easily access KKBOX’s huge library through the Play-Fi app, either through their existing accounts or by opening a new one. The app is also available in Chinese, which will further boost its acceptance and popularity among subscribers in our view.

DTS also entered into an agreement with QQ Music, China’s leading digital music provider, to integrate the music service with Play-Fi app. Subscribers can now download the music service from both Google Play and Amazon’s (AMZN) App Store.

The recent partnerships reflect DTS’s growing focus on gaining market share in Asia (particularly China) as growth slows down in the domestic and European markets.

DTS has forged strategic partnerships with a number of Asian consumer electronics manufacturers such as Samsung, Pantech, Yulong, Lenovo, Panasonic, Fujitsu, Haier, LG, Changhong, Hisense, TCL, Konka, Skyworth and Huawei.

These partnerships have not only expanded the company’s penetration in the Asian markets but also boosted revenue growth over the last few quarters.

We believe that DTS will continue to gain from accelerated expansion of its technology into new markets, such as smartphones, portable devices, digital media players and network-connected TV space.

This coupled with higher penetration in the Chinese smartphone markets and incremental revenues from the acquisition of SRS labs will drive top-line growth over the long term. Moreover, this will help DTS to fight significant competition from Dolby Laboratories (DLB) going forward.

Currently, DTS has a Zacks Rank #1 (Buy).

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