Coding Technologies' compression system is used in digital broadcasting and the Internet. The Stockholm company's customers have included South Korean mobile telecommunications operator SK Telecom, Finnish mobile telecommunications company Nokia Corp. and streaming media company RealNetworks Inc. of Seattle.

Dolby officials in a conference call said they expect Coding Technologies to add $20 million to its revenue in fiscal 2008, which ends September 2008. Dolby said 80% of CT's revenues come from the mobile market, the balance from the Internet.

"Given CT's presence in the handset market, the relationships they've built up and their expertise, it accelerates our strategy of putting our technology in the handset market," Dolby CEO Bill Jasper said during the call.

Coding Technologies is backed by Swedish venture capital firm VC Cimon as well as private and industrial investment.

It is Dolby's first acquisition since April, when it paid $28 million for BrightSide Technologies Inc., a provider of high-definition imaging technology.

In response to a question on the call regarding whether the company expected to do an acquisition of a video-related company, Jasper said video remains "extremely strategic" to Dolby, but it "could not pass up the opportunity" to pick up CT.

Jasper also said any future acquisitions would have to fit into what Dolby is doing "from a technology standpoint," and that the company does has no parameters regarding deal size, but Dolby would go after "any acquisition we believe we can absorb financially."

San Francisco-based Dolby was founded in 1965, but did not become a public company until 40 years later. The widely recognized Dolby brand, which is synonymous with noise reduction technology that enabled "multiple track" recording, helped define the psychedelic sounds of The Beatles and Jimi Hendrix on their groundbreaking albums of the late 1960s.

Today, it is a leading maker of audio signal processing systems for the motion picture, broadcasting, music and consumer electronics industries.