DSP Group, Inc. Reports Second Quarter 2002 Earnings

Revenues for the quarter increased 45% sequentially and 38% YoY

SANTA CLARA, Calif., July 17, 2002 -- DSP Group, Inc. (NASDAQ: DSPG) today announced results for the second quarter of 2002, ending June 30, 2002.

Moshe Zelnik, CFO of DSP Group, noted, "Given the contemplated combination of our DSP Core licensing business with Parthus Technologies plc., under U.S. GAAP, we have begun to report the statements of income of the product business of DSPG (the "continued operations") as a stand alone company, with one line representing the net profit contribution of our DSP Core licensing business (the "Discontinued Operations") and, two lines representing the net assets and net liabilities of the "discontinued operations" in the balance sheets.

Our statements of income for the second quarter 2002 include an unusual loss item (Impairment of available for sale marketable securities) in the amount of $9,815,000, associated with the decline in value of our holdings of AudioCodes Ltd. shares (NASDAQ: AUDC). To facilitate the analysis of our financial statements, we have supplemented our GAAP financial statement by including a proforma P&L statements that excludes both this unusual loss item and the tax credit related to it, as well as the unusual item related to the "aborted spin off expenses and others", in the first quarter 2002.

For the convenience of our stockholders, we also included a separate carve-out P&L statement for the Discontinued Operations - Ceva Inc."

The Company previously reported that it has received a favorable ruling from the Internal Revenue Service, which satisfies the final precondition of the proposed combination of its DSP Cores Licensing business with Parthus Technologies plc. announced on April 5th, 2002. The transaction remains subject to normal closing conditions, including approval by the High Court in Ireland and by the Parthus stockholders.

The Company also announced that it had two significant products launches during this quarter, the Xpert Teak, which is a first silicon platform of its kind offered in a licensing model, merging a DSP Core with a Host of subsystems. An article published in the EE Times on July 8, 2002 quoted Will Strauss, president of market research firm forward concepts (Tempe, Ariz.) saying "This is the most complete DSP IP System on the street".
During the second quarter 2002, the Company began to ship it's new 2.4 GHz Multi hand set chip sets which support up to 8 handsets on one base unit. The chip set also enables direct outdoor communication between handsets (2 way radio).

Eli Ayalon, Chairman & CEO of DSP Group, stated, "we are very proud of our financial results, they reflect the success of our R&D investment strategy in the last 4 years. Our R&D expense increased from $ 8,400,000 in 1997 to $ 26,100,000 in 2001. This effort resulted in a series of new products that drive our growth despite a very tough business environment. Our traditional policy of tight control of headcount and company expenses, enabled us to achieve a high degree of profitability during the second quarter, despite market conditions."
Ayalon also stated "The separate reports of our two business lines unveil a sizeable and profitable fabless semiconductor company that has achieved a gross margin of 40% and operating profit of 13%, demonstrating significant and continuous growth.
Our DSP Core Licensing business, despite the top line pressure due to the crisis in the communications technology sector, has shown continued profitability, with a gross margin of 93% and operating profit of 27.5% for the second quarter 2002. We believe that the combination of this business with Parthus will create a company that will play a major role in the Silicon IP market and will demonstrate both growth and profitability."

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.

This press release contains statements that qualify as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995, including statements concerning the role of the combination of our DSP Cores licensing business and Parthus in the Silicon IP market and its potential for growth and profitability. These forward-looking statements are based on current expectations and the Company assumes no obligation to update this information. In addition, the events anticipated in these forward-looking statements, including the proposed combination with Parthus, may not actually arise. The Company's actual results could differ materially from those described in this press release if for any reason the spin-off of our DSP Cores licensing business does not occur. Other factors which may effect future operating results or our stock price are discussed under "RISK FACTORS" in our reports on form 10-K for the year ended December 31, 2001 and form 10-Q for the quarter ended March 31, 2002, both of which have been filed with the Securities and Exchange Commission and are available on our 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 second 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=6006 .
For more information, please contact Yaniv Arieli, Director of Investor Relations, DSP Group at (408) 986-4423.

DSP GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME - US GAAP

(In thousands, except per share amounts)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2002	2001	2002	2001
Product revenues and other	$ 31,899	$ 19,338	$ 53,025	$ 37,544
Cost of product revenues and other	19,154	11,416	31,766	21,157
	__ __ __	__ __ __	__ __ __	__ __ __
Gross profit	12,745	7,922	21,259	16,387
Operating expenses:
Research and development	4,975	4,921	9,879	9,986
Sales and marketing	2,541	2,325	4,477	4,432
General and administrative	985	1,220	1,915	2,236
Aborted spin off expenses and other	---	---	865	---
	__ __ __	__ __ __	__ __ __	__ __ __
Total operating expenses	8,501	8,466	17,136	16,654
	__ __ __	__ __ __	__ __ __	__ __ __
Operating income (loss)	4,244	(544)	4,123	(267)
Other income (expense):
Interest and other income, net	2,541	3,344	5,150	6,621
Equity in gain of unconsolidated    subsidiaries Minority interest in loss of subsidiary	-- -- __ __ __	-- -- __ __ __	-- -- __ __ __	105 173 __ __ __
Income after financial and other Impairment of available-for-sale     marketable securities Income (loss) before provision for income taxes	6,785 (*) (9,815) __ __ __ (3,030)	2,800 -- __ __ __ 2,800	9,273 (*) (9,815) __ __ __ (542)	6,632 -- __ __ __ 6,632
Provision (benefit) for (from) income taxes	(**)(2,112)	1,115	(**)(1,799)	1,720
	__ __ __	__ __ __	__ __ __	__ __ __
Net income (loss) from continued operations Net income from discontinued operations (***)	(918) 995 __ __ __	1,685 3,672 __ __ __	1,257 1,510 __ __ __	4,912 6,107 __ __ __
Net income	$    77 _______ _______	$ 5,357 _______ _______	$ 2,767 _______ _______	$ 11,019 _______ _______
Net earnings per share:
Basic	$0.00	$ 0.20	$0.10	$ 0.42
Diluted	$ 0.00	$ 0.20	$ 0.10	$ 0.40
Shares used in per share computations:
Basic	27,035	26,574	26,993	26,495
Diluted	27,896	27,445	27,946	27,427

(*) Related to AudioCodes Ltd. Stock amortization (**) Including tax credit related to Audiocodes Ltd. (***) Related to the DSP Licensing activities which are planned        to be discontinued following the merger with Parthus

DSP GROUP, INC.

CONSOLIDATED PRO FORMA STATEMENTS OF INCOME

(In thousands, except per share amounts)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2002	2001	2002	2001
Product revenues and other	$ 31,899	$ 19,338	$ 53,025	$ 37,544
Cost of product revenues and other	19,154	11,416	31,766	21,157
	__ __ __	__ __ __	__ __ __	__ __ __
Gross profit	12,745	7,922	21,259	16,387
Operating expenses:
Research and development	4,975	4,921	9,879	9,986
Sales and marketing	2,541	2,325	4,477	4,432
General and administrative	985	1,220	1,915	2,236
	__ __ __	__ __ __	__ __ __	__ __ __
Total operating expenses	8,501	8,466	16,271	16,654
	__ __ __	__ __ __	__ __ __	__ __ __
Operating income (loss)	4,244	(544)	4,988	(267)
Other income (expense):
Interest and other income, net	2,541	3,344	5,150	6,621
Equity in gain of unconsolidated subsidiaries Minority interest in loss of subsidiary	-- -- __ __ __	-- -- __ __ __	-- -- __ __ __	105 173 __ __ __
Income after financial and other Provision for income taxes Net income (loss) from continued operations	6,785   1,355 __ __ __ 5,430	2,800   1,115 __ __ __   1,685	10,138   1,958 __ __ __   8,180	6,632   1,720 __ __ __ 4,912
Net income from discontinued operations Net income	995 __ __ __ $ 6,425 ______ ______	3,672 __ __ __ $ 5,357 ______ ______	1,510 __ __ __ $ 9,690 ______ ______	6,107 __ __ __ $ 11,019 ______ ______
Net earnings per share:
Basic	$ 0.24	$ 0.20	$ 0.36	$ 0.42
Diluted	$ 0.23	$ 0.20	$ 0.35	$ 0.40
Shares used in per share computations:
Basic	27,035	26,574	26,993	26,495
Diluted	27,896	27,445	27,946	27,427

The above pro forma consolidated statements of income have been adjusted to exclude the following items to US GAAP reported net income:

Reported net income per US GAAP Adjustments: Aborted spin off expenses and other	$ 77   --	$ 5,357   --	$ 2,767   865	$11,019   --
Impairment of available-for-sale marketable securities (AudioCodes Ltd.) Tax benefit	9,815 (3,467)	-- --	9,815 (3,757)	-- --
	__ __ __	__ __ __	__ __ __	__ __ __
Pro forma net income	$ 6,425 _______ _______	$ 5,357 _______ _______	$ 9,690 _______ _______	$11,019 _______ _______

DSP GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

	June 30,	December 31,
Assets	2002	2001
Current Assets:
Cash and cash equivalents Cash designated to combination Marketable securities and short term bank deposits	$ 30,969 40,000   56,133	$ 39,146     70,893
Trade receivable, net	13,550	6,315
Inventories	9,747	2,048
Deferred income taxes	2,098	2,098
Other accounts receivable and prepaid Expenses	964	1,547
Assets of discontinued operation	14,544	12,197
Total current assets	168,005	134,244
Property and equipment, net	5,027	5,390
Long term marketable securities	126,795	139,752
Other investments	11,557	25,536
Other assets, net	6,263	6,229
Severance pay fund	1,252	1,228
	__ __ __	__ __ __
Total Assets	$ 318,899 ________ ________	$ 312,379 ________ ________
Liabilities and Stockholders' Equity
Current liabilities:
Trade payable	$ 13,603	$ 5,123
Other current liabilities	15,114	11,592
Liabilities of discontinued operation	5,806	7,852
Total current liabilities	34,523	24,567
Long term liabilities:
Accrued severance pay	1,287	1,294
Deferred income taxes	2,205	7,541
Total long term liabilities	3,492	8,835
Stockholders' equity:
Common stock	27	27
Additional paid-in capital	155,969	155,969
Less cost of treasury stock	(4,209)	(8,623)
Accumulated other comprehensive income (loss)	(200)	2,652
Retained earnings	129,297	128,952
Total stockholders' equity	280,884	278,977
	__ __ __	__ __ __
Total liabilities and stockholders' equity	$ 318,899 ________ ________	$ 312,379 ________ ________

CEVA INC.

CONSOLIDATED STATEMENTS OF INCOME - US GAAP

(In thousands)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2002	2001	2002	2001
License and royalties	$ 3,782	$ 5,856	$ 6,995	$ 10,666
Technical support, maintenance and other	804	1,164	1,687	2,322
	__ __ __	__ __ __	__ __ __	__ __ __
Total revenues	4,586	7,020	8,682	12,988
Cost of revenues	305	341	616	607
	__ __ __	__ __ __	__ __ __	__ __ __
Gross profit	4,281	6,679	8,066	12,381
Operating expenses:
Research and development, net	1,566	1,481	3,216	2,688
Sales and marketing	790	702	1,493	1,330
General and administrative	662	674	1,355	1,354
	__ __ __	__ __ __	__ __ __	__ __ __
Total operating expenses	3,018	2,857	6,064	5,372
	__ __ __	__ __ __	__ __ __	__ __ __
Operating income	1,263	3,822	2,002	7,009
Financial income, net	32	115	50	221
	__ __ __	__ __ __	__ __ __	__ __ __
Income before provision for income taxes	1,295	3,937	2,052	7,230
Provision for income taxes	300	265	542	1,123
	__ __ __	__ __ __	__ __ __	__ __ __
Net income	$ 995 ______ ______	$ 3,672 ______ ______	$1,510 ______ ______	$ 6,107 ______ ______