DSP (DSPG) 8-K DSP Group, Inc. Reports Second Quarter 2010 Earnings

Exhibit 99.1

DSP Group, Inc. Reports Second Quarter 2010 Earnings

SAN JOSE, Calif., July 29, 2010—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.”

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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.

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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.

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:

• US Dial-In # 1-888-286-8010 (passcode: 30127868)

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

For more information, please contact Orly Garini-Dil, +1-408-240-6839, or

email: orly.garini@dspg.com

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DSP GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended 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

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DSP GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (NON-GAAP)

(In thousands, except per share amounts)

	Three Months Ended June 30,					Six Months Ended 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

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Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended 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	)

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DSP GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

	June 30, 2010			December 31, 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

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