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DSP Group Issues Letter To Shareholders Regarding Potential Proxy Contest

What's more, we expect noise elimination technology to be increasingly integrated in mid-range smartphones and feature phones – as opposed to just high end phones – as well as smart TVs, game consoles, personal computers and automobiles.* All of this, we believe, bodes well for the future growth and profitability of your company.*

To be clear, the board of DSP Group is open-minded about incremental and fundamental changes that could drive shareholder returns and value, and we are entirely open to working with Starboard and other shareholders who wish to contribute productively to that end. The board's willingness to work constructively with Starboard is demonstrated by the board's invitation to Jeff Smith, Chief Executive Officer and Chief Investment Officer of Starboard, to personally become a director of the company so that he and Starboard can more fully understand the company, its business and prospects, and the initiatives undertaken in response to Starboard's suggestions. This would also allow Mr. Smith to participate directly in building value for all shareholders of the company. That invitation remains open.

However, we also remain firm that turning control of the company over to a board representing a single shareholder holding only approximately 10% of the company's outstanding shares, would not be in the best interests of the company, its shareholders or the goal of maximizing shareholder value, especially when you consider that Starboard's expertise is in investing for short- to medium-term returns and not in the long-term management of a technology company with global operations. The present board – joined by Mr. Smith, if he is willing to serve – has all the necessary experience and expertise to best serve the company and its shareholders, and is committed to maximizing shareholder value, and has demonstrated open-mindedness to doing whatever is necessary to that end.

We firmly believe that the company is on the right track to reach an inflection point and resume revenue growth by focusing and executing on its growth drivers and estimate that these growth initiatives could generate approximately $50 million dollars in 2014, more than enough to offset any weakness in our DECT business.* We are fully committed to achieve these goals and will not allow a potential proxy contest with Starboard to have any effect on our continuing commitments to our customers, employees and suppliers. We have made great progress to date and are very excited about our new products and prospects and the future of our company.*

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