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DSP Group, Inc. Reports Financial Results for First Quarter 1999
DSP Group, Inc.



FOR IMMEDIATE RELEASE

For more information, contact:
Michael Cohen
Investor Relations
DSP Group, Inc.
408-986-4300
mcohen@dspg.com

DSP GROUP, INC. REPORTS

FOR FIRST QUARTER 1999

SANTA CLARA, CALIFORNIA - April 22, 1999. DSP Group, Inc. (NASDAQ: DSPG) today announced its financial results for the first quarter ended March 31, 1999.

Revenues for the first quarter of 1999 were $10,462,000, a decrease of 33% compared to $15,676,000 in the first quarter of 1998. Net income for the first quarter decreased by 63% to $1,182,000 or $0.11 per share (diluted), compared to net income of $3,211,000 or $0.31 per share (diluted) in the first quarter of 1998.

Revenues from sales of ICs decreased by 51% while revenues from licensing and royalties have increased by 73%.

The 47% increase of operating expenses, include the additional R&D and Sales & Marketing for the newly acquired wireless communication activities and products.

Eli Ayalon, President and CEO of DSP Group said, "The sharp decline in the products revenues and the earnings for the quarter was anticipated in our last earnings release. As we have explained, the reason for the sharp decline in the product revenues was the phasing out of our D64xx line of products and the phasing in of the new line - the D16xxx.".

Mr. Ayalon continued, "Strong bookings in the first quarter of 1999, a substantial part of which were for the new D16xxx line, indicate that the migration from the old product generation to the new line has successfully taken place as planned".

Mr. Ayalon went on saying, "The company has already received its first significant orders for the newly acquired line of 900 MHz RF and Baseband chips, for delivery in the third quarter of 1999. Because of the interest created in the market with the introduction of our new line of wireless 900 MHz spread spectrum telephony products, we believe that in the year 2000 this line will become a substantial contributor to our revenues and earnings".

DSP Group, Inc. is a leader in the development and marketing of high-performance, cost-effective digital signal processing cores used in a wide range of applications for industries such as wireless communications, telephony and personal computing. By combining its DSP core technology with its advanced speech processing algorithms, DSP Group also delivers a wide range of enabling application-specific ICs, such as ICs for fully featured integrated telephony, for 900 MHz spread spectrum wireless telephony products and for IP telephony applications.

Statements contained in this release concerning the anticipated effect of 900MHz spread spectrum telephony products may constitute forward-looking statements. These statements involve certain risks and uncertainties such as acceptance of the company's new products by existing OEM customers and potential customers, the ability of the company to produce its new products at competitive costs, the volume and timing of product orders, the number and timing of new licensing agreements, the Company's reliance on independent foundries and dependence on a limited number of OEM customers.

This press release is also available through the company's News on Call fax service, which can be reached at (800) 758-5804, company code 112025.


DSP GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share amounts)

    Three Months Ended
    March 31,
    1999 1998
Revenues:      
Product sales   $ 6,522 $ 13,401
Licensing, royalties and other   3,940 2,275
    -- -- -- -- -- --
Total revenues   10,462 15,676
Cost of revenues:      
Product sales   3,751 7,727
Licensing, royalties and other   75 66
    -- -- -- -- -- --
Total cost of revenues   3,826 7,793
    -- -- -- -- -- --
Gross profit   6,636 7,883
       
Operating expenses:      
Research and development   3,361 2,028
Sales and marketing   1,916 1,313
General and administrative   1,252 1,092
    -- -- -- -- -- --
Total operating expenses   6,529 4,433
    -- -- -- -- -- --
Operating income   107 3,450
       
Other income (expense):      
Interest and other income   1,130 940
Interest expense and other   (104) (42)
Equity in income (loss) of equity method investees, net   442 (66)
    -- -- -- -- -- --
Income before provision for income taxes   1,575 4,282
Provision for income taxes   393 1,071
    -- -- -- -- -- --
Net income   $ 1,182 $ 3,211
       
Net income per share:
Basic   $ 0.11 $ 0.32
Diluted   $ 0.11 $ 0.31
       
Shares used in per
share computation:
     
Basic   10,769 10,080
Diluted   10,953 10,387


DSP GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

    March 31, December 31,
    1999 1998
Assets      
Current Assets:      
Cash, cash equivalents and marketable securities   $ 97,323 $ 66,989
Accounts receivable, net   3,486 5,721
Inventories   1,129 2,182
Deferred income taxes   1,374 1,374
Other accounts receivable   2,826 1,608
    -- -- -- -- -- --
Total current assets   106,138 77,874
Property and equipment, net   6,569 4,236
Other investments, net of accumulated amortization   2,276 1,834
Other assets   135 135
Capitalized - Software   1,625 ---
Severance pay fund   959 864
Deferred income taxes   848 848
    -- -- -- -- -- --
Total Assets   $ 118,550 $ 85,791
       
Liabilities and Stockholders' Equity  
Current liabilities:      
Accounts payable   $ 2,165 $ 2,360
Other current liabilities   6,484 6,841
    -- -- -- -- -- --
Total current liabilities   8,649 9,201
Accrued severance pay 1,005 895
Stockholders' equity:      
Common stock   12 9
Additional paid-in capital   110,035 74,632
Retained earnings   13,150 13,107
Less cost of treasury stock   (14,301) (12,053)
    -- -- -- -- -- --
Total stockholders' equity   108,896 75,695
    -- -- -- -- -- --
Total liabilities and
stockholders' equity
  $ 118,550 $ 85,791