DSP Group, INC. Reports First Quarter 2002 Earnings

SANTA CLARA, Calif., April. 22, 2002 -- DSP Group, Inc. (NASDAQ: DSPG) today announced results for the first quarter of 2002, ending March 31, 2002.

The Company announced first quarter 2002 revenues of $25,222,000, an increase of 4% from revenues of $24,174,000 for the first quarter 2001. Net income for the first quarter was $2,690,000 a decrease of 52% from $5,662,000 net income for the first quarter of 2001. Diluted earnings per share (EPS) for the first quarter of 2002 decreased 52% to $0.10, compared with $0.21, for the first quarter of 2001. Net income and EPS, excluding a one-time write-off of certain expenses including expenses related to the abandoned IPO of the Company's IP licensing business , would have been $3,267,000 and $0.12, respectively, for the first quarter ended March 31, 2002.

Moshe Zelnik, CFO of DSP Group, noted that the operating expenses include the one-time unusual expense of $865,000, $767,000 of which expense relates to the abandoned IPO of the IP Licensing business.

Eli Ayalon, Chairman & CEO of DSP Group, stated, "We are glad to announce that in the first quarter of 2002, one of our largest OAK DSP Core Licensees, has licensed our TeakLite DSP Core for GPRS applications".

Ayalon added, "We are looking forward to the closing of the recently announced proposed merger of our DSP Core Licensing business with Parthus Technologies plc. The chip development business for advanced applications show a clear trend towards open DSP architecture and a growing demand for complete platform level IP solutions. We view Parthus Technologies as the leading supplier of complete platform level IP solutions. We believe that the merger will create a one stop shop for DSP based Silicon IP, and will offer OEM's and Semiconductor Companies a faster and easier entry to growing technology markets".

About DSP Group, Inc.

DSP Group, Inc. is a global leader in the development and marketing of high-performance, cost-effective, licensable digital signal processing cores. The Company's family of DSP cores provides solutions for low-power, cost-driven applications, such as cellular, broadband communication, VoIP, multimedia, advanced telecommunication systems, disk drive controllers and many other types of embedded control applications. By combining its DSP core technologies with its proprietary, advanced speech-processing algorithms - DSP Group also delivers a wide range of enabling, application specific ICs for full-featured integrated telephony products and applications, including 900 MHz and 2.4 GHz wireless technologies. DSP Group, Inc., maintains an international presence with offices located around the globe.
Statements contained in this release relating to the proposed merger of our core licensing business with Parthus Technologies plc, the trend toward open DSP architecture and growing deman for complete platform level IP solutions are forward looking statements. They involve risks and uncertainties, most importantly whether and if so when the proposed merger will occur and whether the anticipated benefits of that merger will be realized. All forward-looking statements are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. These factors and other factors which may effect future operating results or our stock price are discussed under "RISK FACTORS" in our report on form 10-K for the year ended December 31, 2001, which has been filed with the Securities and Exchange Commission and is also available on our Web site (www.dspg.com) under Investor Relations.

Earnings conference call

DSP Group has scheduled a conference call for 5:00 p.m. EDT today to discuss first quarter results and invites you to listen to a the 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.videonewswire.com/event.asp?id=4167.

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

DSP GROUP, INC.

TRENDED CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF INCOME

(In thousands, except per share amounts)

	Three Months Ended
	March 31,
	2001	2000
Revenues:
Product sales	$ 18,048	$ 18,362
Software licensing, royalties and other	4,637	6,126
	^{_ _ _}	^{_ _ _}
Total revenues	25,222	24,174

Cost of revenues:
Product sales	12,459	9,683
Software licensing, royalties and otherer	464	324
	^{_ _ _}	^{_ _ _}
Total cost of revenues	12,923	10,007
	^{_ _ _}	^{_ _ _}
Gross profit	12,299	14,167

Operating expenses:
Research and development, net	6,554	6,272
Sales and marketing	2,639	2,735
General and administrative	1,623	1,696
Aborted offering expenses and other	865	^{_ _ _}
	^{_ _ _}	^{_ _ _}
Total operating expenses	11,681	10,703
	^{_ _ _}	^{_ _ _}
Operating income	618	3,464
Other income (expense):
Interest and other income	2,682	3,467
Interest and other expenses	(55)	(84)
Equity in earnings of affiliate	---	105
Minority interest in losses of subsidiary	---	173
	^{_ _ _}	^{_ _ _}
Income before taxes on income	3,245	7,125
Taxes on income	555	1,463
	^{_ _ _}	^{_ _ _}
Net income	$ 2,690	$ 5,662
Net earnings per share:
Basic	$ 0.10	$ 0.21
Diluted	$ 0.10	$ 0.21
Shares used in per share computations:
Basic	26,951	26,415
Diluted	28,059	27,438

DSP GROUP, INC.

TRENDED CONSOLIDATED FINANCIAL STATEMENTS

BALANCE SHEETS

(In thousands)

	March 31,	December 31,
	2002	2001
Assets
Current Assets:
Cash and cash equivalents, marketable securities and short term bank deposits	$ 28,307 68,274	$ 39,146 70,893
Trade receivable, net	17,779	14,430
Inventories	2,549	2,098
Deferred income taxes	2,338	2,338
Other accounts receivable and prepaid Expenses	1,097	1,866
	^{_ _ _}	^{_ _ _}
Total current assets	120,344	130,771
Property and equipment, net	7,088	7,589
Long term marketable securities	154,493	139,752
Other investments, net	17,580	25,536
Other assets, net	6,484	6,419
Severance pay fund	2,413	2,312
	^{_ _ _}	^{_ _ _}
Total Assets	$ 308,402	$ 312,379

Liabilities and Stockholders' Equity
Current liabilities:
Trade payable	$ 9,190	$ 5,830
Other current liabilities	16,328	17,613
	^{_ _ _}	^{_ _ _}
Total current liabilities	25,518	23,443
Long term liabilities:
Accrued severance pay	2,444	2,418
Deferred income taxes	3,835	7,541
	^{_ _ _}	^{_ _ _}
Total long term liabilities	6,279	9,959
Stockholders' equity:
Common stock	27	27
Additional paid-in capital	155,969	155,969
Less cost of treasury stock	(5,962)	(8,623)
Accumulated other comprehensive income (loss)	(3,685)	2,652
Retained earnings	130,256	128,952
Total stockholders' equity	276,605	278,977
	^{_ _ _}	^{_ _ _}
Total liabilities and stockholders' equity	$ 308,402	$ 312,379