DTS and Lowry Digital Get Hitched to Focus on Digital Cinema

In early January, DTS (Digital Theater Systems, Inc.) announced that it had acquired Lowry Digital Images (LDI), a privately held company that provides digital image enhancement services based on proprietary technology. According to LDI president John Lowry, the sale enables his company to focus on R&D to optimize its system for efficiency and speed. "We’ve been growing like crazy," reports Lowry. "Our ability to get the work out the door was impaired by not having enough money to add capacity and senior people we’ve sorely needed."

With DTS’ support, says Lowry, LDI will focus on developing higher degrees of automation. "Our vision has always been to ride the curve of computer animation to the point that all moving picture archives could benefit from our proprietary technology," he says. Digital Cinema is one area of interest, reveals Lowry, but the greater emphasis for the near term is the digital intermediate arena. "We can make a major contribution there," he says. "Films will look like they’ve been acquired in 65mm instead of 35mm."

DTS, which has made its name in digital audio featured on more than 24,000 motion picture screens worldwide and in 280-million DTS-licensed consumer electronics products, paid approximately $11 million in cash to acquire all outstanding LDI shares. DTS will be required to issue up to 857,000 shares of its common stock to former LDI stockholders in the event LDI meets specified performance criteria during 2005 and 2006. LDI is expected to generate revenues of approximately $10 million and be accretive to earnings in 2005.

For DTS, the rationale behind the LDI acquisition is to marry picture and sound, says DTS president/CEO Jon Kirchner. "As we move into digital delivery and Digital Cinema, image quality will be a focus for many decades," he says. "The Lowry acquisition allows us to be well positioned for Digital Cinema and the move to High Definition for broadcast and next-generation HD DVDs." Kirchner reported that DTS plans on additional acquisitions to round out its integrated offering for digital content providers.