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DSP Group, Inc. Reports Record Third Quarter 2001 Revenues of $35 Million
SANTA CLARA, Calif., Oct 22, 2001 /PRNewswire via COMTEX/ -- DSP Group, Inc. (Nasdaq: DSPG) today announced results for the third quarter, ended September 30, 2001.

Record high revenues for the third quarter of 2001 were $34,955,000, compared with revenues of $28,988,000 for the third quarter of 2000 and revenues of $26,358,000 for the second quarter of 2001, an increase of 21% year over year, and an increase of 33% sequentially. Net income for the third quarter of 2001 was $6,854,000 and EPS was $0.25 (diluted), compared with net income of $8,428,000 and EPS $0.29 (diluted) for the third quarter of 2000.

Eli Ayalon, Chairman and CEO of DSP Group, stated, "During these challenging economic times, we are pleased to announce better than expected third quarter results. The significant increase of our product sales reflect the success of our new 900 MHz Narrow Band design launched in the second quarter of this year. We are also pleased to announce that we have licensed this quarter our TeakLite DSP Core to an American corporation for the development of a cellular 3G product. In this period of unprecedented worldwide economic uncertainty we see continued strength in the quality of our DSP core licenses pipeline, but a more protracted sales cycles of the licenses to prospective clients.

"We have also launched this quarter a new Licensable Intellectual Property (IP) Solution for the emerging digital still camera market. This solution incorporates our Teak DSP Core, along with application software and a development system."

Mr. Ayalon added: "We would also like to announce that the U.S. Internal Revenue Service has recently granted us the tax free ruling for the contemplated transaction regarding the spin-off of our licensing business. The company will consider the timing of the implementation of the spin-off in the context of its overall business strategy and improving market conditions."

Moshe Zelnik, VP Finance and CFO of DSP Group stated: "During the third quarter of 2001, the Company has repurchased 40,000 shares of its common stock, at an average price of $20.30 per share, for an aggregate price of approximately $812,000. We believe that this repurchase is a good use of our capital, given our strong cash position. This repurchase was authorized under a repurchase program established by DSP Group in March 1999, of which 1,082,000 shares represent the balance of shares available for repurchase under the plan."

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, including those concerning the future growth of the Company's business and the demand for the Company's core technologies may constitute forward-looking statements. These statements involve certain risks and uncertainties such as a slowdown in the U.S. consumer market, where most of the products, including the Company's ICs are sold; acceptance of the Company's new products by existing customers and potential customers; and the Company's ability to develop and produce its new products at competitive costs. 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-Q for the quarter ended June 30, 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 third 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 of DSP Group's website at www.dspg.com or through www.ccbn.com.

Additional information is available on the World Wide Web at www.dspg.com. 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.

    For more information, please contact Yaniv Arieli at 408-986-4423

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

                                     Three Months Ended   Nine Months Ended
                                        September 30,       September 30,
                                       2001      2000       2001      2000
    Revenues:
    Product sales                     $26,945   $21,925   $63,838   $60,469
    Licensing, royalties and other      8,010     7,063    21,649    17,619

    Total revenues                     34,955    28,988    85,487    78,088

    Cost of revenues:
     Product sales                     17,283    12,623    38,242    34,825
     Licensing, royalties and other       361       292     1,166       824

    Total cost of revenues             17,644    12,915    39,408    35,649

    Gross profit                       17,311    16,073    46,079    42,439

    Operating expenses:
     Research and development, net      6,564     5,553    19,238    15,035
     Sales and marketing                3,065     3,189     8,827     9,098
     General and administrative         2,200     1,761     5,790     4,647
     Unusual items                         --        --        --    14,154

     Total operating expenses          11,829    10,503    33,855    42,934

    Operating income (loss)             5,482     5,570    12,224     (495)
    Other income (expense):
     Interest and other income          3,200     3,823    10,147     9,824
     Interest and other expenses         (53)      (51)     (158)     (131)
     Equity in income of affiliate         --       724       105     1,864
    Minority interest in losses
     of subsidiary                         --       205       173       253
    Capital gains from realization of
       Investments                         --        --        --    57,593

    Income before provision
     for income taxes                   8,629    10,271    22,491    68,908
    Provision for income taxes          1,775     1,843     4,618    27,816

    Net income                         $6,854    $8,428   $17,873   $41,092
    Net earnings per share:
       Basic                            $0.26     $0.31     $0.67     $1.55
       Diluted                          $0.25     $0.29     $0.65     $1.42
    Shares used in per share
     computations:
       Basic                           26,732    26,932    26,576    26,576
       Diluted                         27,790    28,927    27,539    28,916


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

                                               September 30,    December 31,
    Assets                                           2001            2000
    Current Assets:
      Cash and cash equivalents,
       marketable securities and
       short term deposits                          $239,933       $223,201
      Trade receivable, net                           16,747         16,932
      Inventories                                      3,489          2,815
      Deferred income taxes                            4,554          4,554
      Other accounts receivable and prepaid
        Expenses                                       2,471          1,445

    Total current assets                             267,194        248,947
    Property and equipment, net                        7,363          6,451
    Other investments, net
     of accumulated amortization                       9,875         21,000
    Other assets, net of accumulated Amortization      6,636          4,259
    Severance pay fund                                 2,207          2,150

    Total Assets                                    $293,275       $282,807
    Liabilities and Stockholders' Equity
    Current liabilities:
      Trade payable                                   $6,339         $8,092
      Other current liabilities                       19,569         19,934

    Total current liabilities                         25,908         28,026
    Long term liabilities:
    Accrued severance pay                              2,303          2,147
    Deferred income taxes                              1,462          5,559
    Minority interest                                     --            910

    Total long term liabilities                        3,765          8,616
    Stockholders' equity:
     Common stock                                         27             27
     Additional paid-in capital                      155,438        151,787
     Other comprehensive income                      (7,197)             --
     Retained earnings                               126,392        114,291
     Less cost of treasury stock                    (11,058)       (19,940)

    Total stockholders' equity                       263,602        246,165

    Total liabilities and
     stockholders' equity                           $293,275       $282,807

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SOURCE DSP Group, Inc.

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

URL:              http://www.ccbn.com
                  http://www.dspg.com
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