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Strategic Acquisition Positions DSP Group to Offer Integrated Video Capability

SANTA CLARA, Calif., May 19, 2003 /PRNewswire-FirstCall via COMTEX/ -- DSP Group, Inc. (Nasdaq: DSPG), a worldwide leader in developing and providing solutions for the residential wireless market, announced today that it has acquired substantially all of the assets of Teleman Multimedia, Inc. ("Teleman"), headquartered in Alviso, Calif. for $5 million in cash.

Teleman, founded in 1998, has developed an advanced silicon platform for video compression and decompression designed to interface with image sensors and panel displays. DSP Group has acquired all the intellectual property of Teleman, including patents and other research and development in process. In addition, it has hired Teleman founder, CEO and CTO, John Hong as vice president for video technologies and other key Teleman engineers in Seoul, Korea and Alviso, Calif.

"The acquisition of Teleman's video technologies opens the door to a very interesting array of multimedia applications," said Eli Ayalon, Chairman and CEO of DSP Group. "We believe that the technology acquired from Teleman combined with our leading voice, data and communications technologies will enable us to continue and grow our business in the years to come."

Mr. Ayalon added: "DSP Group plans to build a new team of 40 designers around the group from Teleman. This team will integrate the Teleman and DSP Group technologies to create new products to meet the developing market demand for video features. The first product integrating the Teleman technology has been defined and has secured one design win. Shipments of this product are expected to begin in the third quarter of 2004. We expect the sales of the company in the fourth quarter of 2004 enriched with the new video products, to show a 30% increase compared to our forecast for the fourth quarter of 2003."

The Teleman silicon platform supports compression standards such as MPEG4, JPEG and H263, which are used in video conferencing applications. Work is already in progress to support the new compression standard H264, which enables improved video quality at low bit rates. The Teleman solution features a unique architecture, which enables high video performance in conjunction with small silicon area and low power consumption.

"We are excited about the opportunity to join DSP Group and work in a company with a remarkably successful track record," said Mr. Hong, "The compelling business rational for joining forces with DSPG is the shared belief that our video technology, combined with DSP Group's voice, data and communication technologies, and DSP Group's impressive customer base, will lead to new business for the company. I am looking forward to joining the DSP Group management team and contributing to the company's continued growth."

Moshe Zelnik, CFO of DSP Group, said: "We will pay $5 million in cash consideration for the assets acquired from Teleman, and we expect additional expenses related to the deal of approximately $200,000.

A one-time charge of $2.6 million related to in-process research and development and other expenses will be included in our financial statements for the second quarter of 2003. An additional amount of $2.6 million related to the established technology and expenses will be amortized over a period of four years.

Over all, Diluted EPS is expected to reflect a decrease of $0.11 for 2003; $0.07 of which is related to the $2.6 million non recurring charges; and $0.04 of which is related to an increase in overall ongoing operating expenses, representing a slight dilution to our previously anticipated performance.

We expect new products built around the acquired technologies to begin generating revenues by the third quarter of 2004."

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 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 and data 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 about the Teleman acquisition made by Mr. Ayalon relating to the growth in business, development of new products, the anticipated shipment schedule for the new products and fourth quarter 2004 revenues, as well as statements made by Mr. Zelnik relating to the expenses and impact on EPS projections. 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, the acceptance by customers of DSP Group's products, DSP Group's ability to differentiate its products from those of its competitors in the same market and the general market demand for products that incorporate DSP Group's technology in the market. These factors and other factors which may effect 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 report, 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.

Management conference call

DSP Group has scheduled a conference call for 10:30 a.m. EDT today to discuss the Teleman asset acquisition 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://www.dspg.com/ir/investor_messageb.html.

For more information, contact:
Yaniv Arieli
President of US Operations
Investor Relations
DSP Group, Inc.
Tel: +1 408 986 4423
Fax: +1 408 986 4442
e-mail: yarieli@dspg.com

SOURCE DSP Group, Inc.

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