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DSP Group, Inc. Reports First Quarter 2008 Earnings

SAN JOSE, Calif., May 2 /PRNewswire-FirstCall/ -- DSP Group, Inc. (Nasdaq: DSPG), a worldwide leader in developing and providing chip-set solutions for residential wireless connectivity, announced today its results for the first quarter ended March 31, 2008.

First Quarter Results:

Revenues for the first quarter of 2008 were $72,729,000, an increase of 48% from revenues of $49,288,000 for the first quarter of 2007. Net loss for the first quarter was $7,608,000 compared to net income of $1,364,000 for the first quarter of 2007. Earnings per share (EPS) for the first quarter of 2008 were a loss of $0.25 compared to earnings of $0.05 for the first quarter of 2007.

Non-GAAP Results:

Non-GAAP net income and diluted EPS for the first quarter of 2008 were $1,441,000 and $0.05 per share on a diluted basis, respectively; a decrease of 73% from the non-GAAP net income of $5,333,000 and a decrease of 74% from non- GAAP diluted EPS of $0.19 per share for the first quarter of 2007. Non-GAAP net income and diluted EPS for the first quarter of 2008 excluded the impact of amortization of acquired intangible assets of $5,782 ,000, associated with the acquisition of the Cordless and VoIP Terminals business of NXP B.V.; equity-based compensation expenses of $3,961,000; and the aggregate tax benefits associated with such expenses of $694,000.

Eli Ayalon, Chairman and CEO of DSP Group, stated: "We expect our traditional cordless market to remain challenging throughout the year as a result of continuing pricing and volume pressures. We expect these pressures to lessen with the ramp-up of our new generation of multimedia products." Ayalon also stated: "During the first quarter of 2008, we repurchased approximately 2,171,000 shares of our Common Stock at an average price of $11.91 per share, for an aggregate price of approximately $25.9 million."

After giving effect to the most recent repurchases, approximately 2,000,000 shares of the Company's Common Stock remain authorized for repurchase under the current repurchase program approved by the Company's board of directors.

About DSP Group

DSP Group, Inc. is a fabless semiconductor company, offering advanced chip-set solutions for a variety of applications. DSP Group is a worldwide leader in the short-range wireless communication market, enabling home networking convergence for voice, video & data. By combining its in-house technologies of Digital Signal Processors (DSPs), portfolio of wireless communication protocols, including DECT, Bluetooth and Wi-Fi, most advanced Radio Frequency CMOS and SiGe, as well as VoIP ICs, DSP Group is a worldwide leader and a one-stop-shop for a wide range of applications. These applications include ISM band digital 900MHz, 2.4GHz and 5.8GHz telephony, European DECT (1.9GHz) telephony, Bluetooth systems for voice, data and video communication and deployment in residential, SOHO, SME, enterprise and automotive applications. DSP Group ICs provide solutions for MP3 players, VoIP Phones, Gateways, and Integrated Access Devices and are widely used in Digital Voice Recorders. More information about DSP Group is available at http://www.dspg.com.

Forward Looking Statements

This press release may contain statements that qualify as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995, including Mr. Ayalon's statement that the traditional cordless market is to remain challenging throughout the year and that the continuing pricing and volume pressures will be lessened following a ramp-up of the new generation of multimedia products. 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 as a result of various factors, including the risk that the cost savings and other synergies from the acquisition of the CIPT business may not be fully realized or may take longer to realize than expected; DSP Group's inability to develop and produce new products at competitive costs and in a timely manner; failure of new products, especially the new generation of multimedia products, to achieve broad market acceptance; and fluctuations in gross margins associated with the sale of existing products.. 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 fiscal 2007 as well as other reports DSP Group has filed with the Securities and Exchange Commission and which are available on DSP Group's Web site (http://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 the financial results for the first quarter of 2008 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 http://www.dspg.com or link to: http://ir.dspg.com./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: 33088619)

--International Dial-In # 1-617-801-6888 (passcode: 33088619)


    For more information, please contact Ofer Elyakim, Vice President of
Business Development, DSP Group Inc. at (408) 240-6839; or e-mail:
ofere@dsp.co.il.


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

                                                      Three Months Ended
                                                           March 31,
                                                      2008           2007
                                                    Unaudited      Unaudited

    Product revenues and other                       $72,729        $49,288
    Cost of product revenues and other                45,776         30,001

    Gross profit                                      26,953         19,287
    Operating expenses:
      Research and development                        20,028         12,757
      Sales and marketing                              6,021          4,197
      General and administrative                       4,250          3,596
      Amortization of intangible assets                5,782              -

      Total operating expenses                        36,081         20,550

    Operating loss                                    (9,128)        (1,263)
    Other income:
      Interest and other income, net                   1,234          3,652

    Income (loss) before provision for income taxes   (7,894)         2,389
    Provision for income taxes income tax benefit)      (286)         1,025

    Net income (loss)                                $(7,608)        $1,364

    Net earnings (loss) per share:
      Basic                                           $(0.25)         $0.05
      Diluted                                         $(0.25)         $0.05

    Weighted average number of shares of Common stock
     used in the computation of:
      Basic                                           30,574         28,455
      Diluted                                         30,757         28,691



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

                                                      Three Months Ended
                                                           March 31,
                                                      2008           2007
                                                    Unaudited      Unaudited

    Product revenues and other                       $72,729        $49,288
    Cost of product revenues and other                45,519         29,835

    Gross profit                                      27,210         19,453
    Operating expenses:
      Research and development                        17,937         10,669
      Sales and marketing                              5,514          3,757
      General and administrative                       3,144          2,136

      Total operating expenses                        26,595         16,562

    Operating income                                     615          2,891
    Other income :
      Interest and other income, net                   1,234          3,652

    Income before provision for income taxes           1,849          6,543
    Provision for income taxes                           408          1,210

    Net income                                        $1,441         $5,333

    Net earnings per share:
      Basic                                            $0.05          $0.19
      Diluted                                          $0.05          $0.19

    Weighted average number of shares of Common stock
     used in the computation of:
      Basic                                           30,574         28,455
      Diluted                                         30,757         28,691



       Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
                   (In thousands, except per share amounts)

                                                      Three Months Ended
                                                           March 31,
                                                      2008           2007
                                                    Unaudited      Unaudited
    GAAP net (loss) income                           $(7,608)        $1,364
    Equity-based compensation expense
      Included in cost of product revenues               257            166
    Equity-based compensation expense
      Included in R&D                                  2,091          2,088
    Equity-based compensation expense
    Included in SG&A                                   1,613          1,900
    Amortization of intangible assets related to NXP
     transaction                                       5,782              -
    Tax benefit resulting from equity-based
     compensation and amortization of acquired
     intangible assets                                  (694)          (185)
    Non-GAAP net income                               $1,441         $5,333
    Non-GAAP basic earnings per share                  $0.05          $0.19
    Non-GAAP diluted earnings per share                $0.05          $0.19



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

                                                    March 31,     December 31,
                                                      2008            2007
                                                   (Unaudited)      (Audited)
    Assets
    Current assets:
      Cash and cash equivalents                      $69,554        $69,586
      Restricted deposits                              3,428              -
      Marketable securities and cash deposits         30,832         63,682
      Trade receivables, net                          44,668         51,636
      Inventories                                     17,652         16,361
      Other accounts receivable                       10,868          8,173
      Deferred income taxes                            5,529          4,011
    Total current assets                             182,531        213,449

    Property and equipment, net                       18,329         14,270

    Long term marketable securities                   35,084         34,469
    Severance pay fund                                 7,379          6,883
    Deferred income taxes                              4,997          5,109
    Goodwill and other intangible assets             233,233        237,969
    Other assets                                       1,892            694
    Total assets                                   $ 483,445       $512,843

    Liabilities and Stockholders' Equity
    Current liabilities:
      Accounts payable                               $28,053        $29,064
      Other current liabilities                       45,565         48,125
    Total current liabilities                         73,618         77,189

     Accrued severance pay                             7,839          7,303
     Accrued pensions                                  2,003          1,758
     Deferred tax liability                              803            372
     Other long term liabilities                       1,556          1,364

    Total long term liabilities                       12,201         10,797

    Stockholders' equity:
     Common stock                                         29             31
     Additional paid-in capital                      304,505        300,542
     Accumulated other comprehensive income            2,446          1,025
     Retained earnings                               178,666        187,063
    Less - Cost of treasury stock                    (88,020)       (63,804)

    Total stockholders' equity                       397,626        424,857

    Total liabilities and stockholders' equity      $483,445       $512,843

SOURCE DSP Group, Inc.
05/02/2008
CONTACT: Ofer Elyakim, Vice President of Business Development of DSP
Group Inc., +1-408-240-6839, ofere@dsp.co.il