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DSP Group, Inc. Reports First Quarter 2002 Earnings

SANTA CLARA, Calif., April. 22 /PRNewswire-FirstCall/ -- DSP Group, Inc. (Nasdaq: DSPG) today announced results for the first quarter of 2002, ending March 31, 2002.

The Company announced first quarter 2002 revenues of $25,222,000, an increase of 4% from revenues of $24,174,000 for the first quarter 2001. Net income for the first quarter was $2,690,000 a decrease of 52% from $5,662,000 net income for the first quarter of 2001. Diluted earnings per share (EPS) for the first quarter of 2002 decreased 52% to $0.10, compared with $0.21, for the first quarter of 2001. Net income and EPS, excluding a one-time write-off of certain expenses including expenses related to the abandoned IPO of the Company's IP licensing business, would have been $3,267,000 and $0.12, respectively, for the first quarter ended March 31, 2002.

Moshe Zelnik, CFO of DSP Group, noted that the operating expenses include the one-time unusual expense of $865,000, $767,000 of which expense relates to the abandoned IPO of the IP Licensing business.

Eli Ayalon, Chairman & CEO of DSP Group, stated, "We are glad to announce that in the first quarter of 2002, one of our largest OAK DSP Core Licensees, has licensed our TeakLite DSP Core for GPRS applications."

Ayalon added, "We are looking forward to the closing of the recently announced proposed merger of our DSP Core Licensing business with Parthus Technologies plc. The chip development business for advanced applications show a clear trend towards open DSP architecture and a growing demand for complete platform level IP solutions. We view Parthus Technologies as the leading supplier of complete platform level IP solutions. We believe that the merger will create a one stop shop for DSP based Silicon IP, and will offer OEM's and Semiconductor Companies a faster and easier entry to growing technology markets."

About DSP Group, Inc.

DSP Group, Inc. is a global leader in the development and marketing of high-performance, cost-effective, licensable digital signal processing cores. The Company's family of DSP cores provides solutions for low-power, cost-driven applications, such as cellular, broadband communication, VoIP, multimedia, advanced telecommunication systems, disk drive controllers and many other types of embedded control applications. By combining its DSP core technologies with its proprietary, advanced speech-processing algorithms

  • DSP Group also delivers a wide range of enabling, application specific ICs for full-featured integrated telephony products and applications, including 900 MHz and 2.4 GHz wireless technologies. DSP Group, Inc., maintains an international presence with offices located around the globe.

Statements contained in this release relating to the proposed merger of our core licensing business with Parthus Technologies plc, the trend toward open DSP architecture and growing demand for complete platform level IP solutions are forward looking statements. They involve risks and uncertainties, most importantly whether and if so when the proposed merger will occur and whether the anticipated benefits of that merger will be realized. All forward-looking statements are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. These factors and other factors which may effect future operating results or our stock price are discussed under "RISK FACTORS" in our report on form 10-K for the year ended December 31, 2001, which has been filed with the Securities and Exchange Commission and is also available on our Web site (www.dspg.com) under Investor Relations.

Earnings conference call

DSP Group has scheduled a conference call for 5:00 p.m. EDT today to discuss first quarter results and invites you to listen to a the live broadcast over the Internet. The broadcast can be accessed by all interested parties through the Investor Relations section (investor message board) of DSP Group's website at www.dspg.com or through PRNewswire web site at http://www.videonewswire.com/event.asp?id=4167 .

For more information, please contact Yaniv Arieli, Director of Investor Relations, DSP Group at 408-986-4423.

                               DSP GROUP, INC.
                  TRENDED CONSOLIDATED FINANCIAL STATEMENTS
                             STATEMENTS OF INCOME
                   (In thousands, except per share amounts)

                                                        Three Months Ended
                                                            March 31,
                                                      2002           2001
    Revenues:
     Product sales                                   $20,585        $18,048
     Software licensing, royalties and other           4,637          6,126
                                                         ---            ---
    Total revenues                                    25,222         24,174

    Cost of revenues:
     Product sales                                    12,459          9,683
     Software licensing, royalties and other             464            324
                                                         ---            ---
    Total cost of revenues                            12,923         10,007
                                                         ---            ---
    Gross profit                                      12,299         14,167

    Operating expenses:
     Research and development, net                     6,554          6,272
     Sales and marketing                               2,639          2,735
     General and administrative                        1,623          1,696
     Aborted offering expenses and other                 865            ---
                                                         ---            ---
    Total operating expenses                          11,681         10,703
                                                         ---            ---
    Operating income                                     618          3,464
    Other income (expense):
     Interest and other income                         2,682          3,467
     Interest and other expenses                        (55)           (84)
     Equity in earnings of affiliate                     ---            105
    Minority interest in losses of subsidiary            ---            173
                                                         ---            ---
    Income before taxes on income                      3,245          7,125
    Taxes on income                                      555          1,463
                                                         ---            ---
    Net income                                        $2,690         $5,662
    Net earnings per share:
     Basic                                             $0.10          $0.21
     Diluted                                           $0.10          $0.21
    Shares used in per share computations:
     Basic                                            26,951         26,415
     Diluted                                          28,059         27,438


                               DSP GROUP, INC.
                  TRENDED CONSOLIDATED FINANCIAL STATEMENTS
                                BALANCE SHEETS
                                (In thousands)

                                                    March 31,    December 31,
    Assets                                            2002           2001
    Current Assets:
     Cash and cash equivalents                       $28,307        $39,146
     Marketable securities and
      short term bank deposits                        68,274         70,893
    Trade receivable, net                             17,779         14,430
    Inventories                                        2,549          2,098
    Deferred income taxes                              2,338          2,338
    Other accounts receivable and prepaid
     Expenses                                          1,097          1,866

                                                         ---            ---
    Total current assets                             120,344        130,771

    Property and equipment, net                        7,088          7,589
    Long term marketable securities                  154,493        139,752
    Other investments, net                            17,580         25,536
    Other assets, net                                  6,484          6,419
    Severance pay fund                                 2,413          2,312
                                                         ---            ---
    Total Assets
                                                    $308,402       $312,379
    Liabilities and Stockholders' Equity
    Current liabilities:
     Trade payable                                    $9,190         $5,830
     Other current liabilities                        16,328         17,613
    Total current liabilities                         25,518         23,443
    Long term liabilities:
    Accrued severance pay                              2,444          2,418
    Deferred income taxes                              3,835          7,541
                                                          --             --
    Total long term liabilities                        6,279          9,959
    Stockholders' equity:
     Common stock                                         27             27
     Additional paid-in capital                      155,969        155,969
     Less cost of treasury stock                     (5,962)        (8,623)
     Accumulated other comprehensive
     income (loss)                                   (3,685)          2,652
     Retained earnings                               130,256        128,952
    Total stockholders' equity                       276,605        278,977
                                                         ---            ---
    Total liabilities and
     stockholders' equity                           $308,402       $312,379


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SOURCE DSP Group, Inc.

-0- 04/22/2002

/CONTACT: Yaniv Arieli, Director of Investor Relations of DSP Group, +1-408-986-4423/