SRS Labs Enjoys Measure of Success in Sound Enhancing

SRS Labs Chairman Thomas Yuen hears a business opportunity in every boombox and overhead loudspeaker.

“We live in a visual world, so people tend to forget the aural side,” said Yuen, whose company is based in Santa Ana. “Sound--clear, rich sound--is our future.”

By modifying aerospace technology, SRS has found a way to create a surround-sound feeling from a two-speaker stereo. The technology, called Sound Retrieval System, works by tweaking recordings so they sound more full and rich.

SRS and its small staff of 21 license their technology to computer-chip makers and collect royalties from consumer electronics manufacturers who use those chips.

So far, at least 15 companies--mostly chip makers, such as Cirrus Logic, Mitsubishi and Toshiba--have paid SRS one-time fees ranging from $50,000 to $500,000. And more than 170 firms have integrated SRS’ technology into a slew of products, from computer speakers to car stereos.

“When the company started in 1993, we were a pure licensing company,” Yuen said. “But that was causing a lot of delays.”

Indeed, the slow adoption rate of the Digital Versatile Disk--which is SRS’ main means of distributing its technology--has made Wall Street nervous. Last year, the company’s shares dropped below their initial offering price.

But this month, the stock price has started to turn around, consistently hitting 52-week highs. On Friday, the stock closed at $9.63 a share.

The reason behind investors’ vote of confidence, analysts said, is a recent acquisition.

Late last month, SRS bought Valence Technology Inc., a Hong Kong-based manufacturer of computer chips and consumer electronics. The move is expected to give SRS the means to build hardware that shows off its technology, and to raise its profile in Asia.

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P.J. Huffstutter covers high technology for The Times. She can be reached at (714) 966-7830 and at p.j.huffstutter@latimes.com