Acquisition Puts SRS Labs on a Sound Footing in Asia

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.

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 that they sound fuller and richer.

SRS and its small staff of 21 license their technology to chip makers and collect royalties from electronics manufacturers who use these 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.

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 the stock price has started to turn around this month and has consistently been hitting 52-week highs. The stock closed Friday at $9.63 a share on Nasdaq.

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

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