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DSP Group, Inc. Reports Third Quarter 2003 Earnings
Achieves All Time Revenue Record

SANTA CLARA, Calif., Oct 20, 2003 /PRNewswire-FirstCall via COMTEX/ -- DSP Group, Inc. (Nasdaq: DSPG) today announced its results for the quarter ended September 30, 2003.

Revenues for the third quarter of 2003 were $47,178,000, an increase of 7% from revenues of $44,005,000 for the third quarter of 2002. Net income for the third quarter of 2003 was $9,640,000 compared with $8,772,000 for the third quarter of 2002 (which included net income of $981,000 related to the discontinued operations of the DSP cores licensing business). Diluted earnings per share (EPS) for both the third quarter of 2003 and 2002 was $0.32. Diluted EPS for the third Quarter of 2002 included an amount of $0.03 related to the discontinued operations.

Eli Ayalon, Chairman & CEO of DSP Group, stated, "We are very pleased with the third quarter results, especially for our continuous quarterly revenue growth on a year-over-year basis for the 9th consecutive quarter. The third quarter is usually the strongest seasonal quarter in our business, we have encountered strong demand for all of our product lines in the third quarter of 2003. We continue to have strong bookings and good visibility into the fourth quarter of 2003."

Moshe Zelnik, CFO of DSP Group, stated: "As previously announced, during the third quarter of 2003, we repurchased 360,000 shares of our Common Stock for a total amount of $7,871,000, at an average price of $21.86 per share. As of September 30, 2003, our cash position, consisting of cash, cash equivalents and marketable securities, reached a level of approximately $267.7 million, reflecting approximately $23.8 million of positive cash flow from operations during the first nine months of 2003."

About DSP Group

DSP Group, Inc. is a fabless semiconductor company that is a leader in the short-range wireless market. By combining its DSP cores technology with advanced RF, communication, video technology and speech-processing algorithms, DSP Group is a worldwide leader in developing and providing short-range communication applications that include digital 900MHz, 2.4GHz, DECT (1.9GHz), 5.8GHz and Bluetooth for voice, data and video communication in residential, SOHO, SME, enterprise and automotive applications. DSP Group's products include advanced RF CMOS and communications technology. DSP Group also develops and markets embedded, integrated silicon/software solution for Voice-over-Digital-Subscriber Line (VoDSL) and Voice-over-Internet-Protocol (VoIP) applications, as well as other Voice-over-Packet applications for Integrated Access Device (IAD) and IP phone. More information about DSP Group is available at www.dspg.com.

This press release may contain statements that qualify as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995, including statements made by Mr. Ayalon relating to strong booking and good visibility into the fourth quarter of 2003. These forward-looking statements are based on current expectations and DSP Group assumes no obligation to update this information. In addition, the events described in these forward-looking statements may not actually arise. DSP Group's actual results could differ materially from those described in this press release as a result of various factors, including unexpected delays in the introduction of new products; failure to achieve broad market acceptance of existing and new products by existing and potential OEM customers; DSP Group's inability to add new customers and develop and produce new products at competitive costs and in a timely manner; and general market demand for products that incorporate DSP Group's technology in the market. These factors and other factors which may affect future operating results or DSP Group's stock price are discussed under "RISK FACTORS" in the Form 10-K for the year ended December 31, 2002, as well as other reports, including Form 10-Qs, DSP Group has filed with the Securities and Exchange Commission and which are available on DSP Group's 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 Web site at www.dspg.com or link to: http://phx.corporate-ir.net/phoenix.zhtml?c=101665&p=irol-calendar .

If you cannot join the call, please listen to the replay, which will be available for approximately two weeks after the call on DSP Group's Web site or by calling the following numbers:

    -- US Dial-In # 1-888-286-8010 (passcode:  93262663)
    -- International Dial-In # 617-801-6888 (passcode:  93262663)

For more information, please contact Yaniv Arieli, President of US Operations, Investor Relations, DSP Group at (408) 986-4423.


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

                              Three Months Ended       Nine Months Ended
                                   Sept 30,                 Sept 30,
                                2003      2002         2003           2002
    Product revenues and
     other                     $47,178   $44,005     $114,739       $97,029
    Cost of product revenues
     and other                  25,643    26,433       63,626        58,199

    Gross profit                21,535    17,572       51,113        38,830
    Operating expenses:
      Research and development   6,704     5,245       17,402        15,124
      Sales and marketing        3,429     3,501        8,616         7,978
      General and
       administrative            1,899     1,608        5,006         3,524
      In-process research
       & development write-off      --        --        2,727            --
      Aborted spin off
       expenses and other           --        --           --           865

      Total operating expenses  12,032    10,354       33,751        27,491

    Operating income             9,503     7,218       17,362        11,339
    Other income
      Interest and other
       income, net               2,112     2,416        5,945         7,566

    Income after financial and
     other income               11,615     9,634       23,307        18,905
    Impairment of
     available-for-sale             --       --            --     (*)(9,815)
    Marketable securities           --       --            241           --
    Capital gains
    Income before provision for
     income taxes               11,615    9,634         23,548        9,090
    Provision for income Taxes   1,975    1,843          4,154       (**)44

    Net income from continuing
     operations                  9,640    7,791         19,394        9,046
    Net income from discontinued
     operations (***)               --      981             --        2,492

    Net income                  $9,640   $8,772        $19,394      $11,538
    Net earnings per share for
     continuing operations:
      Basic                      $0.34    $0.29          $0.70        $0.34
      Diluted                    $0.32    $0.29          $0.66        $0.32

    Net earnings per share for
     discontinued operations:
      Basic                      $0.00    $0.03          $0.00        $0.09
      Diluted                    $0.00    $0.03          $0.00        $0.09

    Net earnings per share
     (combined):
      Basic                      $0.34    $0.32          $0.70        $0.43
      Diluted                    $0.32    $0.32          $0.66        $0.41

    Weighted average number
     of shares of Common Stock
     used in computing of:
      Basic                     28,168   27,104         27,677       27,030
      Diluted                   30,142   27,707         29,343       27,848

    (*)    Related to impairment of marketable securities
    (**)   Included a tax credit related to impairment of marketable
           securities
    (***)  Related to the DSP cores licensing business (Ceva) which was
           discontinued in November 2002 following the combination of Ceva
           with Parthus Technologies plc to form ParthusCeva, Inc.


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

                                                  September 30,   December 31,
                                                      2003            2002
    Assets                                         (Unaudited)      (Audited)
    Current assets:
      Cash and cash equivalents                      $35,316        $39,919
      Marketable securities                           47,177         45,371
      Trade receivables, net                          18,131          4,873
      Inventories                                      7,316          6,916
      Other accounts receivable                        1,740          1,352
      Deferred income taxes                            1,685          1,685
      Assets of discontinued operation, net              679          4,737
        Total current assets                         112,044        104,853

    Property and equipment, net                        4,597          4,690
    Long term marketable securities                  185,169        150,692
    Investment in equity security of traded
     companies                                        34,023         12,031
    Severance pay fund                                 2,177          1,616
    Long term pre-paid expenses and lease deposits       421            386
    Goodwill                                           5,804          5,804
    Other intangible assets                            2,230             --

    Total Assets                                    $346,465       $280,072

    Liabilities and Stockholders' Equity
    Current liabilities:
      Trade payable                                   $9,420         $6,745
      Other current liabilities                       32,898         21,552

    Total current liabilities                         42,318         28,297
    Long term liabilities:
    Accrued severance pay                              2,325          1,686
    Deferred income taxes                             10,200          2,371
    Other long term liabilities                        1,421             --
    Total long term liabilities                       13,946          4,057

    Stockholders' equity:
      Common Stock                                        29             27
      Additional paid-in capital                     173,021        156,443
      Accumulated other comprehensive income          14,798            476
      Retained earnings                              102,353         90,772
    Total stockholders' equity                       290,201        247,718

    Total liabilities and stockholders' equity      $346,465       $280,072

SOURCE DSP Group, Inc.

Yaniv Arieli, President of US Operations, Investor Relations of DSP Group, Inc., +1-408-986-4423

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