Exactly one year ago, we were blunt in describing its management as frankly dubious. While the company's undeniable strength lies in its highly lucrative royalty-based business model - which generates a gross margin of 90% - its great weakness still lies in the treatment of minority shareholders.

We pointed out that Dolby's sales had been stagnating for ten years, but that its cost structure was suffering from pronounced inflation in remuneration, particularly via stock option and similar schemes. In addition to stagnating sales, operating profit therefore fell sharply over the cycle.

Shopify, for example, avoided this pitfall - see Shopify Inc. : High expectations published in this same section a few days ago - the substantial amounts devoted to share buy-backs at Dolby served only to compensate for dilution, rather than to remunerate shareholders. They were therefore to be seen as an expense rather than an actual return of capital.

CEO Kevin Yeaman, incidentally, was always quick to offload the shares he so generously received at the expense of shareholders. Against this backdrop, we did not look kindly on a valuation that seemed abnormally high - remember that its multiples had almost doubled in ten years, despite the sum of the problems mentioned.

Unsurprisingly, the latter has contracted over the past twelve months. And with good reason: despite the inflationary trend, sales are down by 2% in 2024; while, despite acquisitions and restated for exceptional restructuring charges, operating profit remains perfectly unchanged.

The Group intends to return to growth - or at least stabilize the situation - with the $429 million takeover of GE Licensing, formerly a subsidiary of GE Aerospace. The deal, announced in June 2024, includes a portfolio of over 5,000 patents, mainly related to digital consumer media and electronics.

For Dolby, it's all about finding a way to offset the critical decline in its linear TV business. By 2024, this segment, which accounts for over a third of its consolidated sales, was still declining by 10%.