Dolby Laboratories (DLB)

On the conference call, management was asked to comment on the current state of the consumer. It was surprising to hear how upbeat their perspective was as literally no mention was made of any softness. While management committed to governing conservatively and keeping close tabs on future changes, they were optimistic that notebook shipments would grow 10% over the next year and the guidance issued was relatively strong. While this optimism doesn’t quite match what has been seen in other consumer discretionary sectors, technology is one of the stronger areas of the market and that may reflect similar underlying views by a broad cut of equity investors.

While there are considerable concerns regarding the state of the overall economy, Dolby appears to operate as one of the “best of breed” in the consumer discretionary category. The stock is not immune from rises in the unemployment rate, or declines in consumer confidence, but at the same time they may receive more than their share of revenue from the economic stimulus package. Since the company has revenue coming in from all corners of the world, they are less likely to get severely hurt by US weakness. A global recession would certainly cause more of a struggle, but at this point there still appears to be solid if not a bit slower growth.