UPDATE 1-Dolby Q4 beats Street, gives weak FY10 EPS view

* Q4 EPS $0.38 vs est. $0.33

* Q4 rev $163.9 mln vs est $156.6 mln

* Sees FY 2010 EPS $1.85-$1.96 vs est. $2.00

Nov 3 (Reuters) - Audio technology licensor Dolby Labs Inc (DLB.N) posted fourth-quarter results that beat market estimates, helped in part by a 25 percent rise in service revenue and a slight drop in operating expenses, but forecast fiscal 2010 earnings below expectations.

For 2010, the company expects earnings of $1.85 to $1.96 per share on revenue of $720 million to $750 million.

Analysts were expecting earnings of $2 on revenue of $732.02 million, according to Thomson Reuters I/B/E/S.

The company also forecast 2010 gross margins of about 88 percent, and 89 percent on an adjusted basis.

For the latest fourth quarter, Dolby earned $44.3 million, or 38 cents a share, compared with $48.6 million, or 42 cents a share, a year ago.

Total revenue rose marginally to $163.9 million.