DTS Inc., an audio technology developer in Calabasas that typically licenses its products for commercial and home theater systems, now wants to expand its share of the car radio and mobile device markets. Earlier this month, the company completed its acquisition of iBiquity Digital Corp., the sole developer and licenser of HD Radio technology. DTS paid $172 million using a combination of debt and cash. HD Radio, a trademarked term, is the only technology approved by the Federal Communications Commission to upgrade from analog AM and FM broadcasting to digital. All 36 of the major auto brands sold in the United States offer HD Radio in a portion of their vehicles, sometimes as a standard feature. In 2014, iBiquity’s HD Radio was built into about 35 percent of all automobiles sold in the country. Jordan Miller, director of global communications for DTS, said more than 25 million vehicles on North American roads are already equipped with DTS sound systems and/or HD Radio technology. He added that approximately 90 percent of Americans listen to broadcast radio and, on average, spend six-plus hours a week listening in their cars. DTS expects those numbers to continue to grow, which made iBiquity an attractive target. “This transaction is a compelling strategic and financial fit,” Miller said. “It gives DTS a bigger footprint in the automotive space as well as increases overall awareness of DTS and perceived listener value.” HD Radio improves sound quality, eliminates static and other interference, and multicasts programs simultaneously. However, unlike the move to digital TV, consumers decide whether or not to make the switch. Radio stations will continue to broadcast both analog and digital signals. Besides growing its presence in the auto sector, DTS also plans to expand its reach in the mobile market. The company already licenses software to mobile phone manufacturers that helps them improve sound quality in their devices. That should help DTS penetrate that market with its HD Radio product. Many mobile phone manufacturers are including FM chips in their products, including cellphones and tablets. The boost in FM chip incorporation could further increase DTS’ mobile market share as popularity for HD Radio technology grows. iBiquity employs around 120 people at its offices in Auburn Hills, Mich., and Piscataway, N.J., as well as its headquarters in Columbia, Md. DTS’ new HD Radio division will operate out of the Columbia facility under the leadership of former iBiquity Chief Executive Bob Struble. DTS’ Miller added that additional members of the iBiquity management team will be retained at this time. So far, the acquisition has had a positive effect on DTS shares. The stock closed Oct. 14 at $28.75, up 6.8 percent from its pre-acquisition price. “Given that it is an accretive acquisition and has positive benefits to both sector penetration and the company’s overall profit profile, we would expect estimates to move higher as well as the investors’ comfort in assigning a higher valuation multiple,” said Eric Wold, a financial analyst at West L.A. brokerage B. Riley & Co. But Wold estimated in a Sept. 3 report on DTS that the acquisition could potentially increase his 2016 operating income estimate for the company by as much as 66 percent.
