Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories conference call discussing third quarter fiscal 2009 financial results. (Operator instructions) I would now like to turn the conference call over to Alex Hughes, Director of Investor Relations for Dolby Laboratories. Please go ahead, Mr. Hughes.

Thank you, Operator. Good afternoon. Welcome to Dolby Laboratories’ third quarter fiscal 2009 earnings conference call. Joining me today are Kevin Yeaman, Dolby Laboratories' President and CEO, and Murray Demo, Executive Vice President and Chief Financial Officer. In addition, Ramzi Haidamus, Executive Vice President of Sales and Marketing is here to participate in today's Q&A. On this conference call, we will be making forward-looking statements that include projections of future operating results for our fiscal year ending September 25, 2009; market trends for the industries in which we compete, and our expectations and beliefs concerning how those trends will affect our operating results; the capabilities and market acceptance of our products and technologies; and our strategic and operational plans and objectives. Important factors such as macroeconomic conditions could cause actual results to differ materially from those in our forward-looking statements. These factors are detailed under the section captioned Risk Factors and elsewhere in our most recent quarterly report on Form 10-Q available at www.sec.gov and on our website at www.dolby.com under the Investor Relations section. Dolby disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise. In addition to reviewing our financial statements and third quarter fiscal 2009 10-Q, you may wish to review the trended financial table that we have posted now on our investor relations section website. As for the structure of this call, Kevin will begin with an overview of the business and Murray will follow with a recap of Dolby's financial results. So with that introduction behind us, I will now turn the call over to Kevin.

Thanks, Alex and thanks to all of you for joining us today. I am pleased to report a strong fiscal third quarter, with revenue of $171 million and net income of $51 million. We saw some of the anticipated effects from a softening economy in our fiscal third quarter but overall our revenue held up well as we continued to benefit from the inclusion of our technologies in a wide range of entertainment devices. We also benefited from approximately $22 million in royalties from prior period shipments. Given our better-than-expected performance, we are raising our fiscal 2009 outlook. Murray will go into more detail on our financial results and outlook later. As we look across our markets, a number of trends, including the transition to digital broadcast, the upgrade to high definition, and the advancement in broadband and mobile delivery are coming together to deliver huge improvements in both the quality and convenience of entertainment. Increasingly, consumers can receive a high definition experience for multiple devices in their home or take their content on the go, either through a notebook computer or a mobile device. The trend towards greater quality and increased convenience is helping to increase the adoption of Dolby's technologies globally while growing our total addressable market through the proliferation of new entertainment devices. We believe these trends play into our strengths, including our leading portfolio of multi-channel audio formats, broad presence throughout the entertainment ecosystem, and a strong global brand. We are focused on leveraging these strengths as we strive to grow the adoption of our multi-channel audio formats globally across our core markets, extend our current portfolio of technologies into adjacent markets, and bring new technologies to market. Let me turn to discussing our first objective, to grow the adoption of our multi-channel audio formats across…

Thanks, Kevin. It’s great to be on the Dolby team and I am excited by our future prospects, and I look forward to meeting many of you in the investment community in the coming months. Now I’d like to discuss Dolby's overall financial performance, highlight some of the major drivers for the quarter, and finish with a discussion of our fiscal 2009 outlook. Revenue for the third quarter was $171.2 million, up 11% year over year. In the third quarter of fiscal 2009, our licensing revenue was $142.1 million, an increase of 11% year over year, and a decrease of 11% sequentially. This includes $21.6 million in royalties from three licensees for prior period shipments, primarily in our consumer electronics and mobile markets. Turning to revenue by market for our third quarter of fiscal 2009, our consumer electronics market grew both year over year and sequentially. However, when excluding prior period royalties recorded this quarter, our consumer electronics business declined year over year due to economic weakness as well as sequentially from last quarter due to typical seasonality. Our broadcast market grew year over year but declined sequentially. Year-over-year growth was driven by increased revenue from set-top boxes, including NTIA converter boxes, and digital transport adapters, or DTA devices in the U.S., as well as the increased adoption of our technologies in European TV shipments. Revenue declined sequentially from fiscal Q2 2009 due to typical seasonality and from a greater amount of revenue recorded last quarter from both DTA and NTIA set-top box devices in advance of a digital broadcast transition in the United States. Our PC market declined year over year due to economic weakness, as well as sequentially due to typical seasonality. We record revenue on our fiscal second quarter for holiday shipments by our OEM customers. Our…

(Operator Instructions) Our first question comes from Ralph Schackart with William Blair. Ralph Schackart – William Blair: A couple of questions, if I could -- first, just sort of high level, I know you addressed about the one-time on the call, can you give us a sense in a normal quarter on a normalized basis what the royalty recovery would be? I’m just trying to figure out what is in the course of regular business and obviously this quarter was a little bit outside in terms of [the return].

Ralph, as you know, in any given quarter there are things that come through in that quarter and that’s true of this quarter as well. The $22 million is an approximation of the royalties over and above what’s normal. There are three specific items which really stood out. Ralph Schackart – William Blair: Okay, so that’s above and beyond -- gotcha. And then Kevin, you addressed it on the call and there’s obviously been some speculation on the attach rate of ISVs as you transition to Windows 7. Can you sort of give us an update what you see in terms of the roll off on the ISB and the transition to Win 7? Do you expect there to be material changes?

Well, we haven’t seen anything specifically yet. As you know, when we first were included on Vista Home Premium and Ultimate, we found that OEMs still found it valuable to include ISVs and to differentiate their multimedia experience. It’s natural that now that we are entering a new operating system cycle, companies are going to sit down and evaluate what the right footprint for them is. We expect some of them will make changes and some of them won’t. It’s really too early for us to predict. What we can say is that we are very pleased that we are in a position where we are going to be on so many versions of the world’s leading operating system. We think we are in a really good position. Ralph Schackart – William Blair: Great -- one more and I’ll turn it over; on the SG&A line item, roughly two quarters in a row, you’ve sort of been trending around $50 million. I know there’s some seasonality in Q4 but is that sort of a good new baseline for modeling purposes going forward? Is that sort of the right range of estimate for us?

In terms of Q2 and Q3, Q2 in particular we had some settlements, as well as in Q3 we had $1 million, so as we look forward to Q4, we do have some activities around sales and marketing that we are going to be investing in, as well as some year-end activities around Sarbanes-Oxley and audit fees that will drive our costs up in Q4 versus Q3 and that’s included in the target that we set of $290 million for the full year. Ralph Schackart – William Blair: Great. Thank you.

Your next question comes from the line of Mike Olson with Piper Jaffray. Mike Olson – Piper Jaffray: Thanks. So when do you expect to start actually recognizing Win 7 related revenue, given it ships in October? Do you expect revenue to kick in in the March quarter?

That’s correct. Mike Olson – Piper Jaffray: Okay. And just switching gears on Dolby Volume, what’s the progress of development of a lighter version of Dolby Volume that would be applicable to more TVs?

We are looking at releasing very soon the code for a lighter version of -- or a version of Dolby Volume that’s appropriate for the mid- and low-end. But given the release of the cycle of getting included in the televisions and so forth, it’s still just probably over a year before you would see that in televisions in the market. Mike Olson – Piper Jaffray: Okay. Thanks very much.

Your next question comes from the line of Ingrid Chung with Goldman Sachs.

First, you talked about some of the one-off items that you are going to be lapping next fiscal year. I was wondering if there were any growth drivers you think that will pick up or make up for those one-off items so that we could see revenue and EPS growth for next year. And then secondly, you talked about some of the deferred revenue that you recognized this quarter, previously you said there was $18 million in deferred revenue that was still left to be recognized -- are we going to see the rest in the next quarter?

Sure, so let me -- do you want to take the second one first, Murray, and then I’ll take the first question?

In terms of deferred revenue, we finished Q3 with around $25 million related to digital cinema in our 3D business and we do expect some of that to come off in the fourth quarter, and that’s included in the targets we’ve provided of $125 million to $130 million for the full year for products and services, so that has been contemplated in those targets.

Okay.

So in terms of thoughts on growth looking forward, as you pointed out, first of all we did have things to consider in your model for 2010 are the one-time items we’ve mentioned and of course, we still for the first half of this year, we are still in a pretty good economy, so that will affect the comps. Now, having said that, excluding the one-time items, we still did grow license revenue this year and by any measure, factoring in the one-time items as well as the good comps, by any measure the broadcast business and the mobile business grew very strong, and in broadcast that was driven by the continued adoption in Europe. In mobile, that was driven by our continued success, our early success in driving Dolby Mobile into the market with handset operators and the continued adoption of HAAC. Those broadcast and mobile trends, we still see continuing into the future and beyond that, we are focusing on looking to drive, to help broadcasters who are trying to bring digital online in Asia and across the world, so we still see broadcast and mobile as very good growth areas for us. And [inaudible] market, as we’ve discussed many times now, that’s really going to depend on the rate of adoption of Windows 7, both on the consumer and the business side, combined with what they are -- how they respond to this with their inclusion of ISV applications. CE is going to have a lot to do with Blu-Ray and what we have seen so far is that given the higher ASPs we have on Blu-Ray, that has largely offset any decline we’ve seen in standard def, so the thing to watch there is Blu-Ray and whether it is really received well this Christmas. And beyond that, we of course, as you know, have a number -- a portfolio of new technologies we continue to take to market, which could begin to have a small impact in 2010, things like Dolby Volume, Dolby Axon and the like.

Okay, great. And just a follow-up on growth drivers for the following year, we’ve heard from Dreamworks that they have seen a lot of international 3D screen growth. And actually that growth has been better than what they have seen in the U.S. recently. I was wondering if you have been the primary beneficiary of that.

We have about 1200 screens in the marketplace right now in 3D, mostly driven by a lot of the titles that have reached the marketplace. We estimate a bit over 5,000 total installations worldwide on 3D, so our -- that gives you a bit of a notion of our share in the marketplace today. We still continuously see a nice healthy growth, given all of the new titles that come out and attraction to our not only business model but our reusable model in the marketplace.

Okay, great. Thank you.

Your next question comes from the line of Steven Frankel with Brigantine Advisors. Steven Frankel – Brigantine Advisors: Thank you. I wonder if you might update us on the European penetration -- what do you think the run-rate is today of your technologies being included in new TVs?

We entered -- as you know, we entered the year at about 20 and we’ve said that we expect to exit this year at around 33%. We think we’ll exit at at least that. I think we could be probably tracking a little ahead of that. Steven Frankel – Brigantine Advisors: Okay, and what’s the pipeline out of new Blu-Ray devices for this holiday season look like?

We are still looking at mostly set-top related products, so you have your traditional set-top box that’s a Blu-Ray, as well as the PS3 and those are the two main drivers. All eyes today are on how many PCs might adopt Blu-Ray playback, so that could tilt the needle as we’ve seen in the standard definition DVD happen in the past, where PC adoption made a significant dent in that growth path. Other than that, we are looking at what you are looking at in terms of stores and what you are seeing in the stores, traditional consumer electronic companies shipping their -- most of their SKUs being BD as opposed to DVD and as Kevin alluded to in the script, breaking the $200 barrier was something very significant. We will probably see something close to the Father’s Day type promotion also as we near the holiday to accelerate the sales. And the most encouraging thing obviously in all of this is the availability of over 1,500 movie titles in Blu-Ray, which is the primary driver in this adoption. Steven Frankel – Brigantine Advisors: Thank you.

Your next question comes from the line of Brian Thackray with Deutsche Bank. Brian Thackray – Deutsche Bank: I am trying to better understand Windows 7 and the third-party DVD issue. I mean, essentially as I think about this, do you expect the timing of those to be one-for-one, in that if you lose some revenue on the ISV side, you’ll gain that immediately back on the enterprise side? Or do you think the enterprise side will take a little bit longer to ramp up, just given the typical adoption cycles?

What it depends on is the decisions that each of the OEMs and each enterprise makes as it relates to the inclusion of ISV software, so they will each make their own decisions about which version of the operating system to ship with and whether or not to ship an ISV application with that and depending on that decision will drive their behavior going forward and the royalties that were paid. Brian Thackray – Deutsche Bank: Can you guys do anything to control that by altering your pricing on that third-party ISV software, the royalty rates around that?

No, we don’t -- actually, most of our pricing is fairly standard, especially when it comes to DVD playback. Brian Thackray – Deutsche Bank: Okay, and I guess you guys had talked about the netbook in terms of further penetrating that market -- can you just give us an update there in terms of where you are at?

The netbook scenario hasn’t changed dramatically from last time we’ve spoken. The two netbook customers for our PCEE technologies are Lenovo and Acer, for the PCEE SKUs, the technologies on the playback using -- so when you add those two customers to the play-back of Dolby Digital content, we have about 20% or so penetration in netbook space. That is not foreseen to change radically until we see Windows 7 roll out and Windows 7 will tell us how the netbook adoption of the starter edition is relative to the premium edition. We’ve heard a lot of discussion as to which one might be more appropriate for that -- for those types of SKUs. What we do know is that Windows 7 will play on netbooks. Obviously we will benefit from the premium version, having a high penetration on netbooks and that remains to play out in the next several months. Brian Thackray – Deutsche Bank: Okay. Thanks, guys.

(Operator Instructions) Your next question comes from the line of Tom Casera with Avondale Partners. Tom Casera – Avondale Partners: Good afternoon. First question -- I just want to make sure I am clear in terms of the prior period shipments, what was really your visibility into that last quarter when giving guidance?

We didn’t assume -- we typically don’t assume large catch-ups like that when we formulate our guidance. Tom Casera – Avondale Partners: All right, thank you. And also, if we can hit European broadcast again, I wonder if you could talk maybe more qualitatively there first about your progress into getting into more countries. I think last quarter, you talked about Poland and Russia, and maybe also a sense of if you think you are getting sort of a steamroller effect where you are getting into a critical mass of countries? And also, in terms of -- what’s the timeline like? For example, I think you got into the U.K. or announced the U.K. last quarter. What’s the timeline in terms of sort of transition -- once you announce that win, how does that country sort of progress towards implementing Dolby?

At a very high level, for just the sake of simplicity, I will categorize all of Europe and Eastern Europe in three categories. The first categories are countries or companies that have decided to adopt our technologies and are currently broadcasting from which we are collecting royalties in those countries. We have discussed some of those countries and [inaudible] such as the U.K. and France and so on. The second category is the types of countries which have decided through their government mandates or the standard that they decided to adopt to actually use the Dolby standard but not on air yet, and those are the early adopters that were discussed in the last couple of earnings calls, such as Italy and Slovenia. And the third categories of countries are the ones that are still considering which standard to adopt, such as Russia and Poland and the neighboring countries to Slovenia, et cetera, and those are the ones who continue to work on in order to have them select one, two, or both of our technologies. So you could see that it’s a bit of a rolling effect. You have the countries that we are collecting from, the countries that have adopted and putting together the infrastructure to start the broadcasting and where we will collect from in the near future, and then the ones that are still formulating their last, their final pieces of their standard which will generate revenue in the longer term. And all of these cases that we mentioned before, we are in the fortunate position that they are selecting between [HEAC] or Dolby Digital Plus, from which we benefit in the long-term and the short-term. Tom Casera – Avondale Partners: And I guess is there any sense in terms of -- when you talk about the early adopters then, what is the timeline in terms of TVs, and once a country has decided to go ahead with Dolby, is it sort of a one-year, two-year, before that country is 100% TVs including Dolby technology?

That’s a good question and it does depend on a country-by-country basis. Let me just take the U.S. as one example. The U.S. is a very unique example where there was a very hard deadline where they were going to stop transmitting in the analog and therefore it pushed all of the broadcasters to go to digital with a deadline which we already passed, and that gave you a very hard visibility into when that switchover will happen. The vast majority of the countries in Europe have not introduced those types of shut-down in the analog transmission. There are some countries, such as France, that have dictated that certain products or all television products must ship with the digital receivers and digital playback within a certain date and that does give us visibility into the hockey stick, if you will, for that country. But the other countries that we have referred to, or if you will the majority of the countries in Europe and Eastern Europe have not introduced these hard deadlines and therefore it is hard for us to give you a visibility as to when the 100% switch-over date will be reached. Tom Casera – Avondale Partners: All right. Thank you.

Your next question comes from the line of Jim Goss with Barrington Research.

Thank you. A couple of questions -- first with regard to the theatrical area, I was wondering if you could talk a little more about the size of the opportunity and the competitive situation with regard to Sony and others in putting equipment in the theaters, especially in 3D. And then separately, last quarter you seemed concerned about the impact of the economy on your revenue stream and I am just wondering if this impact has been deferred or you tended to weather it better than you thought you might have and what sort of a timeframe we are looking at going forward.

I’ll take the first part of the question and then hand it over to Kevin for the second part. To date, only about 10% of the world’s movie screens have converted to digital, so this market is still in its early stages. There’s still some uncertainty in the market, including the availability of financing, which we believe is necessary to fund a large scale rollout, as well as the industry going with a 2K solution, a 4K solution, or a mix of both. We currently offer a 2K solution and believe it provides a high quality image within the 2K infrastructure to the industry. To date, we have shipped about 2,700 of our digital systems and 1,200 digital 3D systems. And for the second question, I’ll turn it over to Kevin.

Actually I’ll go ahead and take this one -- in terms of the economy, as Kevin mentioned earlier, in the first half of the year we didn’t feel as much of the economic impact because of the way we report revenue in the quarters [that follow shipments]. However, when you look at this quarter for licensing and you take out the back royalties of $21.6 million, we were down 6% in licensing as opposed to being up 11%, so we are now feeling the economic slowdown, it has caught up to us and when you look at the targets we’ve provided for the full year, which obviously includes the fourth quarter in front of us, we have factored in this current economic position into those targets. So it has affected us now.

All right. Thank you.

And with no further questions, I would now like to turn the call back over to Mr. Kevin Yeaman.

Thank you, everybody for joining us today. Murray, Alex and I will be on the road as we go through this quarter so we look forward to seeing many of you. Thanks.

Once again, this does conclude today’s call. Thank you for your participation.