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DSP Group, Inc. Reports Third Quarter 2002 Earnings ---- Achieves All Time Revenue Record 62% Increase YoY
SANTA CLARA, Calif., Oct 22, 2002 /PRNewswire-FirstCall via COMTEX/ -- DSP Group, Inc. (Nasdaq: DSPG) today announced results for the third quarter of 2002, ending September 30, 2002.

Record high revenues for our semiconductor business for the third quarter of 2002 were $44,005,000, compared with revenues of $27,143,000 for the third quarter of 2001, an increase of 62%. Net income for the third quarter of 2002 was $8,772,000 and EPS was $0.32 (diluted), compared with net income of $6,854,000 and EPS $0.25 (diluted) for the third quarter of 2001.

The discontinued operations, the DSP Core Licensing business, had revenues of $4,852,000 and net income of $981,000 for the third quarter of 2002.

Boaz Edan, COO of DSP Group said: "The successful launch of our 2.4 GHz line of products in the first half of 2002 is reflected in our substantial growth in revenues in the third quarter of 2002 compared with the third quarter of 2001. The 2.4 GHz line of products is driving our sales growth and significantly increasing our market share".

Eli Ayalon, Chairman & CEO of DSP Group stated: "In what may possibly be the most challenging downturn ever faced by the technology sector in general and semiconductor industry in particular, remarkably we have reached all time records in Revenues, Operating profit and Net Profit (excluding one time capital gains). The cash position of the company increased this quarter by $13,152,000.

Mr. Ayalon went on saying: "These results show that following the spin off of our DSP Core Licensing business, we will be left with a strong fabless semiconductor company, having an exceptional level of annual revenues per employee, expected to exceed $800,000 in 2002. Our employees and managers continue to show leadership in these tough times by achieving these excellent results."

In connection with the closing of the deal with Parthus Technologies plc, Moshe Zelnik, CFO of DSP Group stated: "The High Court of Ireland approved the scheme of arrangement that allows the combination of Parthus and Ceva into one Company. We are currently, together with Parthus, completing the process of registering the combination under the U.S. and U.K. Securities Laws, and expect that the transaction will close and trading of the common stock of ParthusCeva on NASDAQ and the London Stock Exchange will commence immediately following completion of the registration process.

About DSP Group, Inc.

DSP Group, Inc. is a semiconductor fabless company that is a leader in the wireless residential market. By combining its DSP Core technology with advanced RF, communication technology and speech-processing algorithms, DSP Group is a worldwide leader in developing and providing Total Telephony Solutions(TM). These applications include digital 900MHz, 2.4GHz, DECT and Bluetooth for residential and automotive applications. DSP Group's advanced RF CMOS and communications technology provides the company with a clear path to a Phone-on-a-Chip(TM) solution. DSP Group also develops and markets embedded, integrated silicon/software solution for Voice-over-Digital-Subscriber Line (VoDSL), voice-over-Internet-Protocol (VoIP) applications, and other voice over packet applications for Integrated Access Device (IAD) and IP Phone.

This press release contains statements that qualify as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995, including statements concerning the success of our 2.4GHz line of products and the completion of the spin-off of our DSP Core Licensing Business. These forward-looking statements are based on current expectations and the Company assumes no obligation to update this information. In addition, the events anticipated in these forward-looking statements, including the proposed combination with Parthus, may not actually arise. The Company's actual results could differ materially from those described in this press release if for any reason the spin-off of our DSP Cores licensing business does not occur. Other factors which may effect future operating results or our stock price are discussed under "RISK FACTORS" in our reports on form 10-K for the year ended December 31, 2001 and form 10-Q for the quarter and six months ended June 30, 2002, both of which have been filed with the Securities and Exchange Commission and are available on our Web site (www.dspg.com ) under Investor Relations.

Earnings conference call

DSP Group has scheduled a conference call for 8:30 a.m. EDT today to discuss third quarter results and invites you to listen to a 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's web site at http://www.firstcallevents.com/service/ajwz365625949gf12.html.

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

                               DSP GROUP, INC.
                 CONSOLIDATED STATEMENTS OF INCOME - US GAAP
                   (In thousands, except per share amounts)

                                    Three Months Ended    Nine Months Ended
                                      September 30,         September 30,
                                    2002        2001       2002       2001

    Product revenues and other     $44,005    $27,143    $97,029     $64,687
    Cost of product
     revenues and other             26,433     17,300     58,199      38,458

    Gross profit                    17,572      9,843     38,830      26,229
    Operating expenses:
      Research and development       5,245      5,273     15,124      15,259
      Sales and marketing            3,501      2,411      7,978       6,844
      General and administrative     1,608      1,391      3,524       3,627
      Aborted spin off
       expenses and other               --         --        865          --

    Total operating expenses        10,354      9,075     27,491      25,730

    Operating income                 7,218        768     11,339         499
    Other income:
      Interest and
       other income, net             2,416      3,022      7,566       9,637
      Equity in earnings
       of affiliates                    --         --         --         105
      Minority interest
       in loss of subsidiary            --         --         --         173

    Income after
     financial and other income      9,634      3,790     18,905      10,414
    Impairment of available-for-sale
     marketable securities              --         --   (*)(9,815)        --

    Income before provision
     for income taxes                9,634      3,790      9,090      10,414
    Provision for income taxes       1,843         96     (**)44       1,825

    Net income from
     continuing operations           7,791      3,694      9,046       8,589
    Net income from
     discontinued operations (***)     981      3,160      2,492       9,284

    Net income                      $8,772     $6,854    $11,538     $17,873
    Net earnings per share
     for continuing operations:
      Basic                          $0.29      $0.14      $0.34       $0.32
      Diluted                        $0.29      $0.14      $0.32       $0.31
    Net earnings per share
     for discontinued operations:
      Basic                          $0.03      $0.12      $0.09       $0.35
      Diluted                        $0.03      $0.11      $0.09       $0.34
    Net earnings per share (combined):
      Basic                          $0.32      $0.26      $0.43       $0.67
      Diluted                        $0.32      $0.25      $0.41       $0.65
    Weighted average number of
     shares of Common Stock
     used in computing of:
      Basic                         27,104     26,732     27,030      26,576
      Diluted                       27,707     27,790     27,848      27,539


    (*)   Related to impairment of AudioCodes Ltd. Stock
    (**)  Including tax credit related to impairment of AudioCodes Ltd.
    (***) Related to the DSP Licensing activities which are planned to be
          discontinued following the merger with Parthus


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


                                   Three Months Ended     Nine Months Ended
                                      September 30,         September 30,
                                     2002       2001       2002       2001

    Product revenues and other     $44,005    $27,143    $97,029     $64,687
    Cost of product
     revenues and other             26,433     17,300     58,199      38,459

    Gross profit                    17,572      9,843     38,830      26,228

    Operating expenses:
      Research and development       5,245      5,273     15,124      15,259
      Sales and marketing            3,501      2,411      7,978       6,844
      General and administrative     1,608      1,391      3,524       3,627

      Total operating expenses      10,354      9,075     26,626      25,730

    Operating income                 7,218        768     12,204         499

    Other income :
      Interest and
       other income, net             2,416      3,022      7,566       9,637
      Equity in earnings
       of affiliates                    --         --         --         105
      Minority interest
       in loss of subsidiary            --         --         --         173

    Income after financial
     and other income                9,634      3,790     19,770      10,414

    Provision for income taxes       1,843         96      3,800       1,825

    Net income from continuing
     Operations                      7,791      3,694     15,970       8,589
    Net income from
     discontinued operations           981      3,160      2,491       9,284

    Net income                      $8,772     $6,854    $18,461     $17,873
    Net earnings per share
     for continuing operations:
      Basic                          $0.29      $0.14      $0.59       $0.32
      Diluted                        $0.29      $0.14      $0.57       $0.31
    Net earnings per share
     for discontinued operations:
      Basic                          $0.03      $0.12      $0.09       $0.35
      Diluted                        $0.03      $0.11      $0.09       $0.34

    Net earnings per share (combined):
      Basic                          $0.32      $0.26      $0.68       $0.67
      Diluted                        $0.32      $0.25      $0.66       $0.65
    Weighted average number
     of shares of Common Stock
     used in computing of:
      Basic                         27,104     26,732     27,030      26,576
      Diluted                       27,707     27,790     27,848      27,539
The above pro forma consolidated statements of income have been adjusted to exclude the following items to US GAAP reported net income:

    Reported net income per US GAAP
    Adjustments:                    $8,772     $6,854     $11,538    $17,873
      Aborted spin off
       expenses and other               --         --         865        --
    Impairment of
     available-for-sale
     marketable securities
     (AudioCodes Ltd.)                  --         --       9,815         --
    Tax benefit                         --         --      (3,757)        --

    Pro forma net income            $8,772     $6,854     $18,461    $17,873


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

                                                  September 30,  December 31,
    Assets                                            2002           2001
    Current Assets:
      Cash and cash equivalents                      $21,361        $39,146
      Cash designated to combination                  40,759             --
      Marketable securities
       and short term bank deposits                   46,903         70,893
      Trade receivable, net                            7,558          6,315
      Inventories                                      9,347          2,048
      Deferred income taxes                            2,098          2,098
      Other accounts receivable and prepaid
        Expenses                                       1,149          1,547
    Assets of discontinued operation                  15,322         12,197
    Total current assets                             144,497        134,244

    Property and equipment, net                        4,572          5,390
    Long term marketable securities                  158,026        139,752
    Other investments                                  8,627         25,536
    Other assets, net                                  6,114          6,229
    Severance pay fund                                 1,302          1,228

    Total Assets                                    $323,138       $312,379

    Liabilities and Stockholders' Equity
    Current liabilities:
      Trade payable                                   $7,225         $5,123
      Other current liabilities                       19,308         11,592
      Liabilities of discontinued operation            5,454          7,852
    Total current liabilities                         31,987         24,567
    Long term liabilities:
    Accrued severance pay                              1,365          1,294
    Deferred income taxes                              1,200          7,541
    Total long term liabilities                        2,565          8,835

    Stockholders' equity:
      Common stock                                        27             27
      Additional paid-in capital                     155,969        155,969
      Less cost of treasury stock                     (2,744)        (8,623)
      Accumulated other comprehensive income (loss)   (2,057)         2,652
      Retained earnings                              137,391        128,952
    Total stockholders' equity                       288,586        278,977

    Total liabilities and stockholders' equity      $323,138       $312,379


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SOURCE DSP Group, Inc.

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