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WR Hambrecht

has lowered its forecasts for

DSP Group

(Nasdaq:DSPG) from the second quarter onwards.

SG Cowen Securities Corporation

is more optimistic, but agrees with WR Hambrecht that DSPG's price target should stand at $35 to $40.

WR Hambrecht analysts Jim Liang and Heather Vane are concerned about the decline in demand for consumer electronic products. The slump affects DSPG because 65% of its revenues are generated by chip sales for mobile phones and other wireless products, the analysts write.

Bank slashes growth forecast from plus-14% to minus-1%

WR Hambrecht has lowered its growth forecast for DSPG from a positive 14% to a negative 1% for the year. It expects revenues of $108 million, compared with an earlier estimate of $125 million.

DSPG is expected to sag to 88 cents, compared with earlier expectations of $1.11. In 2002 however the bank foresees growth of 20%, from the base of its lowered expectations of 2001.

WR Hambrecht does not see anything catalyzing a rally by DSPG shares, given the slowdown in the U.S. But they believe that once the situation improves, which could happen in the second half of 2002, demand for DSPG products will recover.

On April 4, DSPG stock traded at a forward multiple of 15 based on 2002 forecasts. The analysts set an according price target of $35, 150% above the stock's market price on April 4.

For the first quarter of 2001 WR Hambrecht expects EPS of 20 cents and $24.4 million revenues.

SG Cowen notes attractive stock multiple

Unlike WR Hambrecht, SG Cowen foresees DSPG benefiting from expected growth in the digital signal processing market for cellular and broadband applications.

Analysts Robert W. Stone and Christopher W. Kindall concur that low demand in the semiconductor market could hurt sales, but expect DSPG to sustain positive momentum in respect of chip licenses.

SG Cowen is pleased with the company's $223 million cash volume and with its holdings in


(Nasdaq:AUDC) stock. DSPG's cash status is $7.88 per share, and its stake in AudioCodes is worth $1.4 per share. SG Cowen agrees with WR Hambrecht about DSPG's price target, setting it at a range of $35 to $40.