Kevin Yeaman - EVP and CFO N.W. (Bill) Jasper, Jr. - President, Director, and CEO Ramzi Haidamus - EVP, Sales and Marketing Tim Partridge - EVP, Products and Technologies

Brian Thackray - Deutsche Bank Ralph Schackart - William Blair & Company Ingrid Chung - Goldman Sachs Michael J. Olson - Piper Jaffray Steven Frankel - Canaccord Adams Andy Hargreaves - Pacific Crest Securities Daniel Ernst - Soleil-Hudson Square Research Alan Davis - D. A. Davidson

Ladies and gentlemen, thank you for stand by. Welcome to the Dolby Laboratories Conference Call discussing Fiscal First Quarter 2008 Results. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded, Thursday, January 31st of 2008. Now I would like to turn the conference call over to Kevin Yeaman, Chief Financial Officer for Dolby Laboratories. Please go ahead Mr. Yeaman. Kevin Yeaman - Executive Vice President and Chief Financial Officer: Thank you operator. Good afternoon everyone and welcome to Dolby Laboratories First Quarter Fiscal 2008 Earnings Conference Call. Joining me today is Bill Jasper, Dolby Laboratories President and CEO. In addition, Tim Partridge, EVP of Products and Technology, Ramzi Haidamus, EVP of Sales and Marketing, and Marty Jaffe, EVP of Business Affairs, are 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 26, 2008; market trends for the industries in which we compete and our expectations 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, as well as our expectations regarding the anticipated benefits of our recent acquisition of Coding Technologies. Important factors could cause actual results to differ materially from those in the forward-looking statements. These factors are detailed under the section captioned Risk Factors and elsewhere in our most recent annual report on Form-10-K and any subsequently filed quarterly reports on Form 10-Q available at www.SEC.gov or 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. As for the structure of today's call, Bill will begin with an overview of the business and I will follow with a run down of Dolby's financial results. So with that introduction behind us, I will now turn the call over to Bill. N.W. (Bill) Jasper, Jr. - President, Director, and Chief Executive Officer: Thank you Kevin. Good afternoon everybody. I am pleased to report a strong start to fiscal 2008 with first quarter revenue increasing 44% year-over-year. During the quarter, we continued to benefit from the inclusion of Dolby technologies in entertainment platforms such as DVD, PC, broadcast, cinema, gaming and automotive while remaining well positioned for key upgrade cycles in next-generation DVD, next-generation gaming, digital cinema, and digital 3D. With this strong base, our focus is on increasing the adoption of Dolby technologies and investing in new opportunities for long-term growth. On today's call, I would like to discuss the progress we are making on both these fronts. In our PC market, we continue to benefit from the inclusion of Dolby technologies in widely used software. Many PCs continue to ship with Microsoft Vista Home Premium or Ultimate editions, as well as with third party DVD playback software, each containing Dolby technology. In addition, we've made solid progress with our PC Entertainment Experience initiative. Through this initiative, Dolby is working with PC manufacturers to incorporate Dolby technologies on the PC firmware for a more immersive audio experience from all sources, streaming, downloadable or DVD. Recently Lenovo announced that Dolby Home Theater would be included across its entire line of IdeaPad consumer notebooks. This announcement joins previous ones from Acer, which has included Dolby Home Theater in its Aspire line of notebooks and from Toshiba, which has included Dolby Home Theater or Dolby Sound Room across its Satellite line of notebooks. Within the PC market, notebook computers are gaining share on desktops. Notebooks can offer comparable processing power to desktops with the added benefit of portability, which consumers increasingly want. We believe the trend to notebook computing benefits Dolby in several ways. First, since notebooks tend to command a higher price point than desktops, in our experience, OEMs are more willing to include premium technologies in them. Second, consumers are increasingly using their notebooks as portable media players and are therefore seeking more media-centric features. Turning to our broadcast market, Dolby continues to make progress growing the adoption of Dolby Digital and Dolby Digital Plus. In addition to Dolby Digital being the mandated audio standard for digital television in North America and Korea, Dolby Digital Plus has been incorporated into a number of European television shipments by leading television manufacturers, helping to increase our penetration of the worldwide TV market. In the digital set-top box category, Dolby Digital remains the de facto audio standard for the North American cable industry. In addition, Bluedu [ph], a new downloadable service has incorporated Dolby Digital plus into its instant access set-top box. In our consumer electronics market, we believe we remain well positioned across the DVD, AVR, and Camcorder categories. In next-generation DVD, Dolby technologies are mandated in both Bluer-ray and HD DVD and price points for both formats continue to decline. The supply of high-definition movie titles is also growing with over 400 titles offered in either Blue-ray or HD DVD to-date. In the AV receiver and camcorder categories, newer Dolby technologies are being adopted. A number of new AV receivers are incorporating Dolby TrueHD and Dolby Digital Plus, while certain HD camcorder models from Sony and Panasonic offer Dolby Digital Creator, enabling consumers to make home movies in Dolby 5.1. In addition to driving additional technologies across our existing markets, we are investing in new opportunities such as mobile, imaging, and Dolby Volume for long-term growth. We continue to position ourselves in mobile. We announced the release of the Dolby Mobile suite of technologies in November which integrates and optimizes a number of technologies for the playback of entertainment on mobile phones. Sharp has licensed Dolby Mobile into two handset models for the Japanese market. Through the acquisition of Coding Technologies, we have expanded our presence across the mobile handset market with the AAC+ audio codec in over 100 handset models. In imaging, we continue to make solid progress through our rollout of 3D Digital systems and our development of high dynamic range technologies. In October, we began shipping Dolby 3D Digital systems across 12 countries in conjunction with the release of DeWalt and 3D. And in January, the world premiere of U2 and Dolby 3D were shown at the Sundance Film Festival to wide acclaim. Dolby's 3D technology utilizes standard white screens already in auditoriums. So exhibitors don't have the added cost nor the image quality compromise associated with the use of silver screens required by competitors. Additionally, Dolby's 3D Digital system supports both 3D and 2D presentations without the need for dedicated 3D auditoriums. Exhibitors can move a 3D movie to additional auditoriums equipped with Dolby 3D Digital cinema systems later in the run using the standard screens. This is an important benefit since exhibitors need to migrate a feature film to a smaller screen as it matures and as new features are prioritized for the main theater. While Dolby Digital Cinema and Dolby 3D represent our first push into imagining, we are equally focused on improving the video of next-generation LCD displays. At this year's Consumer Electronics Show, we demonstrated the capabilities of Dolby's high dynamic range technologies, which provide dramatically enhanced contrast with extended brightness and dynamic range for LCD televisions with LED backlighting technology, resulting in truer blacks, brighter whites, and a vivid image. Another technology that we believe is well suited for the television market is Dolby Volume. Late last year, the market's first IC with Dolby Volume was approved. At this year's CES, we demonstrated Dolby Volume in a prototype AV receiver by Onkyo, as well as the prototype television unit from Syntax- Brillian. In summary, we believe we are well positioned in many markets and are focused on driving long-term growth through the adoption of the additional Dolby technologies and through the investment in new opportunities such as mobile, imaging and Dolby Volume. With that, I will hand it over to Kevin. Kevin Yeaman - Executive Vice President and Chief Financial Officer: Thank you Bill. I would like to start by discussing Dolby's overall financial performance followed by highlighting some of the major drivers of our P&L in the first quarter of 2008 and I will finish by providing our guidance for fiscal 2008. Revenue for the first quarter was $150 million, up 44%year-over-year and 16% sequentially. First quarter licensing revenue was $122 million, an increase of 49% year-over-year and 19% sequentially. Growth was primarily driven by strong results from our PC market, as well as from our broadcast, consumer electronics, and gaming markets. In the first quarter, our PC market doubled year-over-year driven primarily by shipments of D Series with Microsoft Home Premium or Ultimate Editions and/or third party DVD playback software, each containing Dolby technology. Licensing revenue from our PC market grew approximately 20% sequentially in the first quarter of 2008, which we attribute to increased PC shipments and the continued strength of Microsoft Vista. Additionally, we saw strength in our PC entertainment experience included in entertainment oriented PCs. Our broadcast market experience, strong year-over-year growth, and sequential growth on demand for set-top boxes and digital televisions containing our technologies. We also benefited from an increasing television attach rate in both North America and Europe. Our CE market experienced single digit growth year-over-year and sequentially. Our other markets category grew led by growth in our gaming market and the addition of our mobile market through our acquisition of Coding Technologies. First quarter products sales were $20 million, up 32% year-over-year and 2% sequentially. Product sales growth both on a year-over-year and sequential basis was driven primarily by sales of our recently introduced 3D products. First quarter services revenue was $7.8 million, an increase of 14% year-over-year and 28% sequentially. The year-over-year increase was driven by growth in services on original films. The sequential increase resulted largely from seasonality as our fourth fiscal quarter is typically a slow one for film releases. Turning to gross margins, our licensing gross margin was 97% in the first quarter down slightly sequentially. Our licensing margin decreased by 1 percentage point sequentially due to amortization of acquired intangible assets from the Coding Technologies acquisition in November of 2007. We expect our licensing margin to be approximately 96% for the full fiscal year 2008 due to amortization of Coding Technologies intangibles for all the remaining quarters. Our product gross margin was 42% in the first quarter of fiscal 2008, a decline of seven points sequentially. The decline in gross margin is primarily due to the increase in sales of our 3D glasses, which have lower margin than our traditional cinema and broadcast products. We have deferred approximately $10 million in revenue to date for Dolby Digital Cinema Systems until certain DCI specifications are clarified and met. We continue to expect to recognize this revenue in the second half of fiscal 2008. Since growth margins on national digital cinema systems are significantly lower than our traditional cinema products, product margins could fall as low as 25% in the quarter we have recognized that deferred digital cinema revenue. Services gross margin was 61%, up eight points sequentially resulting from higher revenue in the first quarter. Operating expense were $65 million in the first quarter of fiscal 2008, up 3% sequentially. Operating expenses increased primarily due to increase personnel expenses from the edition of new employees, particularly through the acquisition at Coding Technologies. Interest income was slightly lower year-over-year and down 16% sequentially due to the lower cash balance following acquisition of Coding Technologies. We expect other income to run at a lower rate in the remainder of fiscal 2008 due to the expenditure for Coding Technologies and lower interest rates following federal reserve rate cuts. Turning to tax, our attach rate for the first quarter fiscal 2008 was 34% and we continue to expect our attach rate for the year to be approximately 35%. Fiscal first quarter net income was $47.7 million or $0.42 per diluted share compared to $29.9 million or $0.27 per diluted share for the first quarter at fiscal 2007. Net income reflect stock based compensation charges of $5.5 million for the first quarter of fiscal 2008 and $4.9 million for the first quarter of fiscal 2007. Net income also reflects charges related to the amortization of intangibles of $2.3 million for the first quarter for fiscal 2008 compared $2.5 million for the first quarter of fiscal 2007. Turning to the balance sheet, Dolby finished the quarter with approximately $510 million in cash and marketable securities. We used approximately $250 million to acquire Coding Technologies during the quarter. This use was partially offset by cash flows from operations of approximately $76 million, driven primarily by net income along with an increase in current liabilities. The acquisition of Coding Technologies resulted in the addition of approximately $59 million in acquired intangible assets and approximately $215 million of goodwill. Additionally, upon the acquisition we created the deferred tax liability of approximately $17 million, which is reflected in non-current liabilities. Let me turn to outlining our expectations for fiscal 2008. For licensing, we now expect revenue of between $470 million and $495 million in fiscal 2008, as we have increased our expectations for the PC market. For products and services, we continue to anticipate revenue of between $105 million and $120 million. The anticipated shift in the market to our digital cinema mix is a difficult category to predict. We continue to base our guidance on the assumption that we will have increased sales of digital cinema and 3D products and that we begin recognizing revenue from digital cinema sales in the second half of fiscal 2008. In summary, we now expect fiscal 2008 revenue to be approximately $575 million to $615 million. We now expect GAAP net income for fiscal 2008 to be approximately $157 million to $167 million and earnings per diluted share to be approximately $1.34 to $1.44. We now expect stock based compensation expense for the full year to be approximately $19 million to $21 million. While we are still in the process of completing our purchase price valuation as it relates to our acquisition of Coding Technologies and the numbers could change we are basing our guidance on approximately $12 million in amortization of intangibles in fiscal 2008. This concludes our prepared remarks. I would now like to turn it over to the operator for questions. Please go ahead operator. Question And Answer

Thank you. [Operator Instructions]. Your first question comes from the line of Brian Thackray with Deutsche Bank. Please go ahead. Brian Thackray - Deutsche Bank: Hi, thanks guys, good quarter. Has anything changed with regards to your guidance. You have higher expectations from the PC side and historically this will -- your out performance into your full year guidance. But has anything else changed given some of the macro economic conditions out there. Are you seeing any weakness in any of your other markets? Kevin Yeaman - Executive Vice President and Chief Financial Officer: We have not... to date we haven't seen weakness in any of our other markets. All of our markets have been quiet strong. But as we look throughout 2008, we are of course very aware of all of the talk and reporting about potential macro economic concerns. And so, as you probably know, we formulated our guidance by speaking with industry analysts, with customers, with partners, really the entire ecosystem and we used that as a starting point for our guidance and we think that we were conservative in our assessment of the information we get from the analysts. That's the basis on which we form our guidance. So as we look across each of our markets, I think we also take into consideration the fact that we have a number of growth drivers that are... that are not particularly tied to unit volume growth, particularly in broadcast and PC where we are expecting most of our growth. So in both of those markets, we are expecting increased attach rates and in PC, we are increasingly confident that the incidence of third party DVD players being included, when a PC is sold with Vista continuing through the end of the fiscal year and we continue to have very good success with our PC entertainment experience initiative which should have the effect of increasing the content in the PC. On the broadcast base, the North America attach rate has gone up since the mandate in March of 2007 last year for all TV's that ship with tuners to ship with digital tuners. And in Europe as Bill mentioned in the script we now have more than one manufacturer shipping TV's in to Europe with Dolby digital plus and that increases our attach rate. So that's kind of how we looked at it as we approached it this quarter. Brian Thackray - Deutsche Bank: I guess as look at our licensing revenue line, it grew49% year-over-year. Is there a way to quantify how much of that came from increased units year-over-year versus increased attach rates, in terms of technology attach rates? Kevin Yeaman - Executive Vice President and Chief Financial Officer: We haven't quantified it that specifically. We did say that PC was the biggest driver and that revenue from our PC market doubled year-over-year. And while unit growth was a factor, the much... the bigger factor was attach rate and in particular, the Microsoft Vista, which did not ... we didn't have that in the comparable quarter a year ago. In broadcast, it's a function of both unit growth and increased attach rate, both are significant factors. In CE its been less about unit growth particularly in DVD, the mainstay in that category and more about a little bit of increase in prices, some additional technologies included in categories such as a camcorder category. Brian Thackray - Deutsche Bank: Hey thanks. Kevin Yeaman - Executive Vice President and Chief Financial Officer: On the product side as we mentioned the 3D... revenue from 3D products began to kick in this quarter. Brian Thackray - Deutsche Bank: That's helpful, thanks guys. Kevin Yeaman - Executive Vice President and Chief Financial Officer: Thank you.

Our next question comes from the line of Ralph Schackart with William Blair. Please go ahead Ralph Schackart - William Blair & Company: Good afternoon. I was wondering if you can maybe give us little bit more color on the Coding acquisition, maybe high level how is the integration going, how are discussions with customers going, and maybe a little bit longer term you talked about CES opportunity to layer on top some of the Dolby technologies, Bill that you talked about in the script with your existing Coding customers base? N.W. (Bill) Jasper, Jr. - President, Director, and Chief Executive Officer: Let me just ... at a very high level, the immigration has been seamless. We were very pleased, we have got a great group of people and great technologies on Board and we expect the company to be fully integrated to our Dolby German and Dolby Sweden offices and to be part of our mobile and broadcast markets. I should point out that in terms of the first quarter, there wasn't a lot of revenue from the acquisition, just because of the timing of the closure. Most of their statements came in before we actually acquired them. Kevin? Kevin Yeaman - Executive Vice President and Chief Financial Officer: Yes, from a financial perspective, that's true. I think the integration is going well from our perspective and we continue to be pretty pleased with it. N.W. (Bill) Jasper, Jr. - President, Director, and Chief Executive Officer: Does that cover that Ralph. Ralph Schackart - William Blair & Company: It does Bill, maybe just little bit more if you could. Have you reached out, maybe it's Ramzi, the customer base just to think about how we could on a go forward basis start to include some more Dolby technologies on top of their core Coding Technologies. Ramzi Haidamus - Executive Vice President, Sales and Marketing: That is indeed the plan as I mentioned before. The initial step of course was to contact all of Coding Technologies customers as well as Dolby's customers, both of which were effective in one way or another. The response have been very positive overall. And of course the next question is now what and we have been architecting our product road maps on a segment by segment basis. The HEAC technology which we inherited from Coding Technologies does play different roles in different segments. So we are on our way to come up with these product road maps and they will be launched according to plan in different settings over the course of the year in a different... normal setting such as our trade shows. More specifically HEAC along with some of the Dolby post processing technologies does become a very powerful combination of technologies, and that has always been our plan moving forward. In terms of specific product launch, we haven't announced anything yet, given that the acquisition we didn't complete that long ago. Overall I would say... I will repeat what Bill said, we are on track vis-à-vis people integration as well technology and product integration. Ralph Schackart - William Blair & Company: Great, that was really helpful Ramzi and one more quick one if I could before turning over. The high level, maybe Kevin, can you sort of comment on the DVD player end market, I know you said CE end market was up single digit as DVD end market sort hold them steady and between product cycle shift. Kevin Yeaman - Executive Vice President and Chief Financial Officer: It's pretty much holding up the way we expected so far. I mean of course we are talking about September quarter shipments. We don't... we are not counting on any big, any significant contribution from next gen DVD, in our fiscal '08 which as you know would have to ship by June to be in our fiscal '08. And on our annual guidance, we are not really counting on growth in DVD shipments. In fact, we have them a little bit down in our guidance assumption, but we have revenue going up on ASPs and inclusion of technologies in categories such as the camcorder. Ralph Schackart - William Blair & Company: Great, thanks guys. Another great quarter. Kevin Yeaman - Executive Vice President and Chief Financial Officer: Thank you.

Thank you, our next question is from the line Ingrid Chung with Goldman Sachs. Please go ahead. Ingrid Chung - Goldman Sachs: Thank you and good afternoon. My question is about PCs, I was wondering if you could give us a idea of the magnitude of the licensing fees for bundle a like Sound Room or Home Theatre versus the third party, IC licensing fee and versus Vista? And then secondly on PCs also, how receptive are HP and Dell to these bundle technologies? Kevin Yeaman - Executive Vice President and Chief Financial Officer: We haven't broken down ASP for that Ingrid, but we are pleased with the additional contribution and there is a factor in the guidance on the performance this quarter. In terms of the receptiveness, I will turn it over to Ramzi for receptiveness, the reception we've had by our customers, I don't know if you have any comments on the specific customers? Ramzi Haidamus - Executive Vice President, Sales and Marketing: Overall, we have been very pleased with the response to the PC entertainment experience. As we showed with our CES booth with increased line of products. We obviously continue to engage with potential new customers. Historically, we have not commented on any of our customer's plans until those customers announce their own products. So, we tend to be, as a back end of those announcements out of respect for confidentiality and planning of our customers. But overall we continue to be very pleased with the response of the PC technology and option. Ingrid Chung - Goldman Sachs: Okay great. Thanks, and then in terms of ultra portable market. Is there anyway that you can sell into that market also for PCs? Ramzi Haidamus - Executive Vice President, Sales and Marketing: I don't see why not. As long as the horse power is there from a CPU perspective, there is nothing and of course there are two small speakers on such ultra portable or a headphones out. There is always some form of the PC entertainment that can be installed on an ultra portable, as long as there is some form of audio out either by a headphone jack or two small speakers. Ingrid Chung - Goldman Sachs: Okay, great. Thank you.

Thank you. Our next question comes from the line of Mike Olson with Piper Jaffray. Please go ahead. Michael J. Olson - Piper Jaffray: Thanks. Just a quick question about Dolby Volume, when do you think that can turn into something that's more of a material contributor. I know it's early on for that. Is it more of an 09 versus '08? Kevin Yeaman - Executive Vice President and Chief Financial Officer: There's nothing significantly in our guidance for '08. I will let Ramzi talk about the progress from a market perspective. This is clearly one of the classic Dolby technology plays over the long-term where the initial launch has been... or the initial effort has been very much coupled with the integrated circuit manufacturers and that's an area we've had good progress working on the reduction of the footprint of the Dolby Volume routines. And as we've shown in at CES we have a couple of prototypes there showing initial progress and market response. So, I would look to 09 in terms of both certified ICs as well as product on the marketplace. Michael J. Olson - Piper Jaffray: Okay and then one just quick question about broadcast revenue. Can you just give us a kind of a latest update on the DCI spec? Kevin Yeaman - Executive Vice President and Chief Financial Officer: So, to be clear you are asking about digital cinema revenue, right? Michael J. Olson - Piper Jaffray: Yes, yes sorry digital cinema. Kevin Yeaman - Executive Vice President and Chief Financial Officer: That's okay, Tim do you want to address that? Tim Partridge - Executive Vice President, Products and Technologies: Yes Mike. There has been some good progress on the DCI spec. As we spoke last time, we were waiting for some specifications to be standard, to be published by SMPTE, the film standard body in December and they did get published. So, we are now actively working to implement that particular standard. DCI does continue to make some refinement, so we have to say that there are still something that are little bit out of our control. So, we'll wait in anticipation to hope that doesn't happen too much. But also going forward, we will be looking for a third party certification authority which the industry is moving towards. Again, that's out of our control but it is something that we would look forward to help us to recognize these revenues. But overall, things are progressing well and we do expect to recognize those revenues if things go to plan as Kevin said towards the second half of the year, that's approximately $10 million. Michael J. Olson - Piper Jaffray: Okay, and just one last one. Sorry to make you repeat this during this part of the call. You said PC was up, double year-over-year. Is that right and what was it sequentially? Kevin Yeaman - Executive Vice President and Chief Financial Officer: We said that it was up about 20% sequentially. Michael J. Olson - Piper Jaffray: Okay, and then did you say what broadcast was up? Kevin Yeaman - Executive Vice President and Chief Financial Officer: Not specifically, we didn't. No. Michael J. Olson - Piper Jaffray: Okay. Thank you.

Thank you. Our next question comes from the line of Steven Frankel with Canaccord Adams. Please go ahead. Steven Frankel - Canaccord Adams: Good afternoon. I just want to dig into your forecast a little more. You've talked about your DVD assumption. What kind of assumption are you making in Digital Television for year-over-year growth? Kevin Yeaman - Executive Vice President and Chief Financial Officer: In Digital Televisions it's... our growth, is more driven by attach rate, than unit volume growth. Although there is unit volume growth, It's a little harder to come up with a sound byte for the TV growth because it's sliced a lot of different ways, in digital and geographical. So, I don't have the specific number for you on that. But again, we based it on our interactions with everyone in that ecosystem and think that it's an appropriate number on which to base our guidance. Steven Frankel - Canaccord Adams: Okay. Would you care to guess when you believe next generation DVD would begin to ramp, if not in your fiscal year this year but when do you think it's a different point? N.W. (Bill) Jasper, Jr. - President, Director, and Chief Executive Officer: It continues to be a very difficult one to call out frankly and we have stayed on the sidelines waiting for this battle to play out and I will hesitate to even guess on when am I play out at this point? Ramzi Haidamus - Executive Vice President, Sales and Marketing: All we can really say Steve is that we don't have any third grade little revenue in this fiscal year for that. Steven Frankel - Canaccord Adams: And then one point of clarification on the PC software DVD player, is it true that the Vista DVD playback doesn't handle Blu-ray or HD DVD TV, you would need a third party player for those tracks. Ramzi Haidamus - Executive Vice President, Sales and Marketing: That's a good question I don't have the answer for that, we can get back to you. Steven Frankel - Canaccord Adams: Okay great. Thank you

Thank you our next question comes from the line of Andy Hargreaves with Pacific Crest Securities. Please go ahead. Andy Hargreaves - Pacific Crest Securities: Hey, just want to ask another question about TV's. Can you give us any quantification of where you think penetration is in terms of the European market? Kevin Yeaman - Executive Vice President and Chief Financial Officer: So the question is on TVs again. So let me just back up. In North America most of our growth is assumed to come from the increased attach rate. In Europe it's a combination of TV growth and attach rate and today our best estimate is that we are getting attached to roughly a third of the television... digital televisions in Europe. Andy Hargreaves - Pacific Crest Securities: And then on... do you some of the expectations built in for the analog-to-digital converter boxes. Kevin Yeaman - Executive Vice President and Chief Financial Officer: Not for fiscal 08 where our assumptions is that that would largely be a fiscal 09 dynamic. Andy Hargreaves - Pacific Crest Securities: And then, can you give us any indication of how big you think that opportunity is? N.W. (Bill) Jasper, Jr. - President, Director, and Chief Executive Officer: Well, we obviously, opportunity is however many those converter boxes they sell. My understanding is that they are targeting something like a 40 million I think I saw. It's 30 million or 40 million, I will get the exact number but that's what they are looking at in terms of the roll out prior to the March 09 half of analog transmissions. Kevin Yeaman - Executive Vice President and Chief Financial Officer: There is also the dynamic of those people which one might choose to get the converter box at that point, which one of them are waiting for the last minute to actually go out and buy digital television, so that's what makes that market hard to predict.. Steven Frankel - Canaccord Adams: Is the ASP comparable to what you be getting on the CD? Kevin Yeaman - Executive Vice President and Chief Financial Officer: If it's just a Dolby digital television versus a Dolby digital converter box, the answer is yes. Steven Frankel - Canaccord Adams: Okay, Thanks.

Thank you, our next question is from the line Daniel Ernst with Soleil-Hudson Square Research. Please go ahead. Daniel Ernst - Soleil-Hudson Square Research: Yes, good evening, thanks for taking my call. Two questions if I may. First, if you look at the margin impact of the DCI shipping recognitions being potentially taking product gross margins down to 25% in that quarter. What would that look like if I spread that recognition out across the core in which they were shipped rather having deferred them and recognized them in one single quarter? And then second question, could you update us on the mix of licensing between DVD, PC broadcasts, mobile, other higher... over better sense of the current mix, thanks. Kevin Yeaman - Executive Vice President and Chief Financial Officer: Sure, so first of all on the question about the impact of margins when we recognize the deferred digital cinema revenue. First of all, there is two dynamics that are part of it, is that it is all hitting in quarter. But part of it is a lot of those units were our first units shipped over not just this year but over previous years and in early days they were shipping at lower margins. So that's a part of the reason for the impact on margins other than just it is all at once. So I think for the full year, we were expecting 35% to 40% margins. And I think it's reasonable to think that once we get through this year we could be in the 40s. And the second part of your question was the breakdown of licensing revenue, is that right? Daniel Ernst - Soleil-Hudson Square Research: Correct. Kevin Yeaman - Executive Vice President and Chief Financial Officer: And... so just for CE, we said that last year that was about 35%, that is over 35% actually, PC was just about 35% and broadcast was over 15%. So in our fiscal '08 guidance because we are assuming most of the growth comes from PC and broadcast, those major markets we would see PC surpassing CE as the largest market and broadcast continuing to gain shares, as a percentage of our licensing revenue. On the other markets which now include mobile should increase quite a lot in fiscal '08 because of the inclusion of most of the revenue from Coding Technologies in the... which is in the mobile space. Daniel Ernst - Soleil-Hudson Square Research: And we would classify things like camcorders within the C category? Ramzi Haidamus - Executive Vice President, Sales and Marketing: We do classify camcorders, AVRs, Home Theatre, The Box System, those are the some of things that our CE category in addition to DVD players. Daniel Ernst - Soleil-Hudson Square Research: Understood. Thank a lot.

Thank you. Our next question is from Alan Davis with D. A. Davidson. Please go ahead. Alan Davis - D. A. Davidson: Yes, just a one question in regards to the PC business and it looks like you pushed out any the expectations that the double dipping on the third party playback software and just those royalties, that will get rationalized this year. So, your expectations that perhaps in fiscal '09, some of that gets rationalized? Kevin Yeaman - Executive Vice President and Chief Financial Officer: I don't know if maybe Ramzi will have some thoughts on '09, I mean just to confirm we are increasingly confident that for '08 people will continue to see value in the additional third party DVD player. And that's based on our discussions with people that are in that industry. Beyond that I don't know, Ramzi do you have any thoughts on '09 yet. Ramzi Haidamus - Executive Vice President, Sales and Marketing: The trend seems to be that the value add which the ISV or independent software vendors are adding is valuable enough for both the tier 1 computer folks to continue to bundle those, even though the Vista package does come with that player. So, whether it's a feature set or the new download and burn model or any of those newly added features that has continued to be packed into these ISV software they are attractive enough, but we haven't seen a... I guess, what I am talking to those ISVs. We haven't seen any trend, downward trend. It's difficult to add color to this because we also don't know if there is going to be an upgrades to the Vista player, it sells next year which could make that player more attractive than it is, etc. So, overall I'd say we are fairly confident that this year is going pretty well versus on this trend and then I'll wait and see until if some new product launches and updates towards the end of this year, before we can comment on the quarters beyond this fiscal year. Alan Davis - D. A. Davidson: Okay. Great, thank you.

Thank you. [Operator Instructions]. We do have a follow up question from the line of Andy Hargreaves with Pacific Crest Securities. Please go ahead. Andy Hargreaves - Pacific Crest Securities: Thanks for taking my question again. Just wondering if you could give us a little more granularity. As we get towards the back half of this year, you talked about little bit but can these embedded technologies on the PC side, the motherboard stuff be pretty significant in terms of revenue or is that more of an ' 09 type of event? Kevin Yeaman - Executive Vice President and Chief Financial Officer: Are you referring to the PC entertainment experience. Andy Hargreaves - Pacific Crest Securities: Yes. N.W. (Bill) Jasper, Jr. - President, Director, and Chief Executive Officer: That is the piece of our revenue this year in '08. Yes. Andy Hargreaves - Pacific Crest Securities: Okay. Any relative quantification you can give us? Kevin Yeaman - Executive Vice President and Chief Financial Officer: We haven't broken that out separately now. Andy Hargreaves - Pacific Crest Securities: Okay. Thanks. N.W. (Bill) Jasper, Jr. - President, Director, and Chief Executive Officer: It did begin to contribute this quarter and we see it being a factor in the year-over-year growth in the second half. Andy Hargreaves - Pacific Crest Securities: Great, thanks.

Thank you. At this time there are no additional audio questions. I would like to turn the call back over to Mr. Bill Jasper for any closing remarks. N.W. (Bill) Jasper, Jr. - President, Director, and Chief Executive Officer: Okay, thank you operator. Thank you all for listening in to our first quarter fiscal '08 earnings call. I appreciate your attention, appreciate the excellent questions, and we look forward to speaking with you in three months time. Thank you.

Ladies and gentleman this does conclude the Dolby Laboratories Incorporated first quarter 2008 earnings conference call. We thank you for your participation and for using AT&T teleconferencing. You may now disconnect.