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DSP Group, Inc. Reports Second Quarter 2010 Earnings

SAN JOSE, Calif., Jul 29, 2010 (GlobeNewswire via COMTEX) --

DSP Group, Inc. (Nasdaq:DSPG), a leading global provider of wireless chipset solutions for converged communications at home, announced today its results for the second quarter ended June 30, 2010.

Second Quarter Results:

Revenues for the second quarter of 2010 were $60,846,000, an increase of 17% from revenues of $52,020,000 for the second quarter of 2009. Net loss for the second quarter of 2010 was $367,000, as compared to net loss of $1,677,000 for the second quarter of 2009. Loss per share for the second quarter of 2010 was $0.02 per share, as compared to a loss of $0.07 per share for the second quarter of 2009.

Non-GAAP Results:

Non-GAAP net income and diluted EPS for the second quarter of 2010 were $4,354,000 and $0.18 per share, respectively, as compared to non-GAAP net income of $718,000 and diluted EPS of $0.03 per share for the second quarter of 2009. Non-GAAP net income and diluted EPS for the second quarter of 2010 excluded the impact of amortization of acquired intangible assets of $2,488,000 associated with the acquisition of NXP's CIPT business and equity-based compensation expenses of $2,233,000. Non-GAAP net income and diluted EPS for the second quarter of 2009 excluded the impact of amortization of acquired intangible assets of $3,058,000 associated with the acquisition of NXP's CIPT business; equity-based compensation expenses of $2,825,000; and a tax benefit of $3,488,000 resulting from a partial reversal of tax reserves.

Ofer Elyakim, CEO of DSP Group, stated, "Our results for the second quarter reflects solid execution and a continued improvement in our business; sales of our DECT products grew sequentially and year over year for both the U.S. and European end markets. We ended the quarter with non-GAAP operating income of approximately $4 million and a strong balance sheet of $121 million in cash and equivalents. Moreover, having focused our R&D resources over the last several quarters on developing our next generation products, we are excited to announce that during the third quarter of 2010 several new innovative products based on our XpandR platform are expected to be launched worldwide."

The Company believes that the non-GAAP presentation of net income and diluted EPS presented in this press release is useful to investors in comparing results for the quarter ended June 30, 2010 to the same period in 2009 because the exclusion of the above noted expenses may provide a more meaningful analysis of the Company's core operating results. Further, the Company believes it is useful to investors to understand how the expenses associated with equity-based compensations expenses are reflected on its statements of income.

Forward Looking Statements

This press release contains statements that qualify as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995, including Mr. Elyakim's statements about XpandR-based products launching in the third quarter. 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 sustainability of the market recovery; unexpected delays in the introduction of new products; especially the new generation of multimedia products; fluctuations in gross margins associated with the sale of existing products; the impact of reductions in lead times and inventory levels by DSP Group customers and their customers; slower than expected change in the nature of residential communications domain; DSP Group's inability to develop and produce new products at competitive costs and in a timely manner or failure of such products to achieve broad market acceptance; 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 fiscal 2009 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 (www.dspg.com) under Investor Relations.

About DSP Group

DSP Group, Inc. (Nasdaq:DSPG) is a leading global provider of wireless chipset solutions for converged communications at home. Delivering system solutions that combine semiconductors and software with reference designs, DSP Group enables consumer electronics (CE) manufacturers to cost-effectively develop new revenue-generating applications with fast time to market. At the forefront of semiconductor innovation and operational excellence for over two decades, and with a growing share of the wireless home telephony market, DSP Group provides a broad portfolio of wireless chipsets integrating DECT, Wi-Fi, PSTN and VoIP technologies with state-of-the-art application processors. Enabling converged voice, audio, video and data connectivity across diverse consumer products -- from cordless and VoIP phones to home gateways and connected multimedia screens -- DSP Group proactively partners with CE manufacturers to shape the future of converged communications at home. For more information, visit www.dspg.com.

The DSP Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6171

Earnings conference call

DSP Group has scheduled a conference call for 8:30 AM ET today to discuss the financial results for the second quarter of 2010 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?p=irol-eventDetails&c=101665&eventID=3209816

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

-- U.S. Dial-In # 1-888-286-8010 (passcode:30127868)

-- International Dial-In # 1-617-801-6888 (passcode: 30127868)

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

                                       Three Months Ended               Six Months Ended
                                            June 30,                        June 30,

                                      2010           2009             2010            2009
                                 -------------  ---------------  -------------  ----------------
                                  (Unaudited)     (Unaudited)     (Unaudited)      (Unaudited)

  Product revenues and other          $ 60,846         $ 52,020      $ 116,956          $ 91,934
  Cost of product revenues and
   other                                37,592           32,940         70,113            59,444
                                 -------------  ---------------  -------------  ----------------

  Gross profit                          23,254           19,080         46,843            32,490
  Operating expenses:
   Research and development             13,541           13,632         27,032            27,368
   Sales and marketing                   4,226            4,284          8,671             8,801
   General and administrative            3,615            3,926          7,377             7,740
   Amortization of intangible
    assets                               2,488            3,058          4,985             6,105
                                 -------------  ---------------  -------------  ----------------


   Total operating expenses             23,870           24,900         48,065            50,014
                                 -------------  ---------------  -------------  ----------------

  Operating loss                         (616)          (5,820)        (1,222)          (17,524)
  Other income :
   Interest and other income,
    net                                    263              582            688             1,184
                                 -------------  ---------------  -------------  ----------------
  Loss before provision for
   income taxes                          (353)          (5,238)          (534)          (16,340)


  Income tax expenses (benefit)             14          (3,561)             17           (3,972)
                                 -------------  ---------------  -------------  ----------------


  Net Loss                              ($367)         ($1,677)         ($551)         ($12,368)
                                 =============  ===============  =============  ================

  Net loss per share:
   Basic                              ($ 0.02)         ($ 0.07)       ($ 0.02)          ($ 0.51)
   Diluted                            ($ 0.02)         ($ 0.07)       ($ 0.02)          ($ 0.51)

  Weighted average number of
   shares of common stock
   used in the computation of:
   Basic                                23,149           22,734         23,128            24,408
   Diluted                              23,149           22,734         23,128            24,408

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

                                     Three Months Ended             Six Months Ended
                                          June 30,                      June 30,

                                      2010         2009          2010           2009
                                 -------------  -----------  ------------  ---------------
                                  (Unaudited)   (Unaudited)   (Unaudited)    (Unaudited)

  Product revenues and other          $ 60,846     $ 52,020     $ 116,956         $ 91,934
  Cost of product revenues and
   other                                37,425       32,745        72,244           59,041
                                 -------------  -----------  ------------  ---------------

  Gross profit                          23,421       19,275        44,712           32,893
  Operating expenses:
   Research and development             12,422       12,229        24,530           24,391
   Sales and marketing                   3,901        3,816         7,903            7,875

   General and administrative            2,993        3,167         5,939            6,201
                                 -------------  -----------  ------------  ---------------


   Total operating expenses             19,316       19,212        38,372           38,467
                                 -------------  -----------  ------------  ---------------

  Operating income (loss)                4,105           63         6,340          (5,574)
  Other income :
   Interest and other income,
    net                                    263          582           688            1,184
                                 -------------  -----------  ------------  ---------------
  Income (loss) before
   provision for
   income taxes                          4,368          645         7,028          (4,390)
  Provision for income taxes
   (income tax benefit)                     14         (73)            17            (484)
                                 -------------  -----------  ------------  ---------------


  Net income (loss)                    $ 4,354        $ 718       $ 7,011        $ (3,906)
                                 =============  ===========  ============  ===============

  Net earnings (loss) per
   share:
   Basic                                $ 0.19       $ 0.03        $ 0.30         $ (0.16)
   Diluted                              $ 0.18       $ 0.03        $ 0.29         $ (0.16)

  Weighted average number of
   shares of common stock
   used in the computation of:
   Basic                                23,149       22,734        23,128           24,408
   Diluted                              23,837       22,901        23,768           24,408


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

                                                            Three Months Ended      Six Months Ended
                                                                 June 30,               June 30,

                                                              2010       2009       2010       2009
                                                           ---------  ---------  ---------  -----------
                                                           Unaudited  Unaudited  Unaudited   Unaudited
  GAAP net loss                                               ($367)   ($1,677)     ($551)    ($12,368)
  Equity-based compensation expense included in cost of
  product revenues and other                                     167        195        369          403
  Equity-based compensation expense included in R&D            1,119      1,403      2,502        2,977
  Equity-based compensation expense included in SG&A             947      1,227      2,206        2,465
  Amortization of intangible assets related to NXP
   transaction                                                 2,488      3,058      4,985        6,105
  Reversal of a reserve that was determined to be no
   longer
  needed due to the expiration of applicable limitation
   statutes
  included in costs of goods sold                                 --         --    (2,500)           --
  Tax benefit resulting from a partial reversal of tax
   reserves                                                       --    (3,488)         --      (3,488)

  Non-GAAP net income (loss)                                 $ 4,354      $ 718    $ 7,011    $ (3,906)
                                                           =========  =========  =========  ===========
  Non-GAAP diluted earnings (loss) per share                  $ 0.18     $ 0.03     $ 0.29     $ (0.16)

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

                                   June 30,        December 31,

                                     2010              2009
                               ----------------  ----------------

                                  (Unaudited)       (Audited)
                               ----------------  ----------------
  Assets
  Current assets:
   Cash and cash equivalents            $31,409           $37,986
   Restricted deposits                      120               120
   Marketable securities and
    short term deposits                  34,977            19,567
   Trade receivables, net                43,848            28,352
   Inventories                           15,473            12,427
   Other accounts receivable
    and prepaid expenses                  9,396            12,162

   Deferred income taxes                     --               178
                               ----------------  ----------------
  Total current assets                  135,223           110,792

  Property and equipment, net             9,303            10,090

  Long term marketable
   securities and deposits               54,678            65,392
  Severance pay fund                      9,535             9,521
  Deferred income taxes                     148                15
  Intangible assets, net                 15,370            20,473
  Investment in other
   companies                              2,200             2,200
  Long term prepaid expenses
   and lease deposits                       633             1,286
                               ----------------  ----------------

                                         82,564            98,887
                               ----------------  ----------------

  Total assets                        $ 227,090         $ 219,769
                               ================  ================

  Liabilities and
   Stockholders' Equity
  Current liabilities:
  Trade payables                       $ 26,019          $ 18,309

  Other current liabilities              20,543            24,470
                               ----------------  ----------------
  Total current liabilities              46,562            42,779
   Accrued severance pay                 10,681            10,572

   Accrued pensions                         847               929
                               ----------------  ----------------
   Total long term
    liabilities                          11,528            11,501

  Stockholders' equity:
   Common stock                              23                23
   Additional paid-in capital           330,656           325,579
   Accumulated other
    comprehensive (loss)
    income                                 (38)             2,174
   Less -- Cost of treasury
    stock                             (120,644)         (123,350)

   Accumulated deficit                 (40,997)          (38,937)
                               ----------------  ----------------

  Total stockholders' equity            169,000           165,489
                               ----------------  ----------------
  Total liabilities and
   stockholders' equity               $ 227,090         $ 219,769
                               ================  ================

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: DSP Group, Inc.

CONTACT:  DSP Group, Inc.
Orly Garini-Dil
+1-408-240-6839
orly.garini@dspg.com