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DSP Group, Inc. Reports Second Quarter 2001 Earnings

Second Quarter 2001 Earnings

SANTA CLARA, Calif., July 18, 2001 -- DSP Group, Inc. (NASDAQ: DSPG) today announced results for the second quarter, ended June 30, 2001.

Revenues for the second quarter of 2001 were $26,358,000, compared with revenues of $25,713,000 for the second quarter of 2000, an increase of 3% quarter over quarter. Net income for the second quarter of 2001 was $5,357,000 and EPS was $0.20 (diluted), compared with net income of $6,771,000 and EPS $0.23 (diluted) for the second quarter of 2000 (excluding the effects in 2000 of a one-time capital gain). Earnings per share including those items were $0.59 (diluted) for the second quarter of 2000.

Eli Ayalon, Chairman and CEO of DSP Group, stated, "We are very pleased that we were able to execute and deliver on our business plan and meet our goals in the last two quarters, despite the continuous uncertainty in the telecommunication and semiconductor sectors. Our total sales increased by 3% compared to the second quarter of 2000, reflecting an increase of 36% in licensing revenues and a decrease of 7% in chip sales."

Mr. Ayalon added, "We are also pleased to announce that ZORAN Corporation this quarter joined our list of DSP Core Licensees by licensing the TeakLite DSP Core. We also had significant deliveries, as planned, of our new Narrow Band 900MHz chip set. This is the first I.C. that integrates all of our IDT (Integrated Digital Telephony) functions with the Baseband (communication protocol) functions on a single chip."

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 Company's ability to develop and market high-performance, cost-effective, licensable digital signal processor cores, 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 March 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.

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

Six Months Ended

   

June 30,

June 30,

   

2001

2000

2001

2000

Revenues:

         

Product sales

 

$ 18,845

$ 20,181

$ 36,893

$ 38,543

Licensing, royalties and other

 

7,513

5,532

13,639

10,556

   

___

___

___

___

Total revenues

 

26,358

25,713

50,532

49,099

           

Cost of revenues:

         

Product sales

 

11,276

11,727

20,959

22,202

Licensing, royalties and other

 

481

210

805

533

   

___

___

___

___

Total cost of revenues

 

11,757

11,937

21,764

22,735

   

___

___

___

___

Gross profit

 

14,601

13,776

28,768

26,364

           

Operating expenses:

         

Research and development, net

 

6,402

4,806

12,674

9,482

Sales and marketing

 

3,027

3,056

5,762

5,909

General and administrative

 

1,894

1,594

3,590

2,886

Unusual items

 

---

---

---

14,154

   

___

___

___

___

Total operating expenses

 

11,323

9,456

22,026

32,431

   

___

___

___

___

Operating income (loss)

 

3,278

4,320

6,742

(6,067)

Other income (expense):

         

Interest and other income

 

3,508

3,207

6,954

6,001

Interest and other expenses

 

(49)

(39)

(112)

(80)

Equity in income of affiliate  

---

703

105

1,140

Minority interest in losses of subsidiary

 

---

48

173

48

Capital gains from realization of Investments

 

 

---

 

17,584

 

---

 

57,593

   

___

___

___

___

Income before provision for income taxes

 

6,737

25,823

13,862

58,635

Provision for income taxes

 

1,380

8,568

2,843

25,971

   

___

___

___

___

Net income

 

$ 5,357

$ 17,255

$ 11,019

$ 32,664

Net earnings per share:

         

Basic

 

$ 0.20

$ 0.65

$ 0.42

$ 1.24

Diluted

$ 0.20

$ 0.59

$ 0.40

$ 1.13

Shares used in per share computations:

         

Basic

 

26,574

26,684

26,495

26,412

Diluted

27,445

29,076

27,427

28,911

DSP GROUP, INC.
TRENDED CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS

(In thousands)

   

June 30,

December 31,

Assets

 

2001

2000

Current Assets:

     

Cash and cash equivalents, marketable securities and short term deposits

 

 

$ 232,427

 

$ 223,201

Trade receivable, net

 

14,136

16,932

Inventories

 

5,208

2,815

Deferred income taxes

 

4,554

4,554

Other accounts receivable and prepaid Expenses

 

2,260

1,445

   

___

___

Total current assets

 

258,585

248,947

Property and equipment, net

 

7,011

6,451

Other investments, net of accumulated amortization

 

 

32,248

 

21,000

Other assets, net of accumulated

Amortization

 

 

6,859

 

4,259

Severance pay fund

 

2,148

2,150

   

___

___

Total Assets

 

$ 306,851

$ 282,807

Liabilities and Stockholders' Equity

 

Current liabilities:

     

Trade payable

 

$ 7,061

$ 8,092

Other current liabilities

 

17,804

19,934

   

___

___

Total current liabilities

24,865

28,026

Long term liabilities:

Accrued severance pay

2,224

2,147

Deferred income taxes

 

9,647

5,559

Minority interest

 

---

910

   

__

__

Total long term liabilities

 

11,871

8,616

Stockholders' equity:

     

Common stock

 

27

27

Additional paid-in capital

 

155,438

151,787

Other comprehensive income

 

7,055

---

Retained earnings

 

122,322

114,291

Less Cost of treasury stock

(14,727)

(19,940)

___

___

Total stockholders' equity

 

270,115

246,165

   

___

___

Total liabilities and

stockholders' equity

 

 

$ 306,851

 

$ 282,807