CEVA Announces Third Quarter Results - a Record 30 Million Units Shipped in the Third Quarter Reflects Strong End Markets Growth

CEVA Reports Increased Profits and Positive Cash Flow

SAN JOSE, Calif., Oct. 26 /PRNewswire-FirstCall/ -- CEVA Inc. (NASDAQ: CEVA), the leading licensor of digital signal processor (DSP) cores and communications solutions to the semiconductor industry, today announced financial results for the third quarter of 2004, ended September 30, 2004.

Total revenue for the third quarter 2004 was $9.7 million, a slight increase from the $9.6 million reported in the second quarter 2004 and a 4% increase compared to $9.3 million in the third quarter 2003. Third quarter licensing revenue of $6.9 million was similar to the 2004 second quarter and increased 7% from $6.5 million in the third quarter 2003. Third quarter 2004 royalty revenue was $1.6 million, up 24% from $1.3 million reported in the second quarter 2004 and a 33% rise from the $1.2 million in the third quarter 2003.

Strong Unit Royalty Growth

Shipped units by licensees increased 30% to 30.5 million in the third quarter 2004 compared to 23 million shipped in the second quarter 2004 and a 110% increase from 14.5 million units shipped in the third quarter 2003.

Increasing Profitability

Third quarter gross margin was 88% compared with 85% in the 2004 second quarter and 85% in the third quarter 2003. Third quarter net income increased 13% to $560,000, or $0.03 per share compared with second quarter 2004 net income of $494,000, or $0.027 per share. The Company recorded a net loss of $1.1 million, or $0.063 net loss per share in the third quarter 2003.

Solid Balance Sheet

The Company generated $0.5 million of operating cash flow during the quarter. At September 30, 2004, cash equivalents and marketable securities were $57.8 million.

"CEVA's strong end-market growth drivers - wireless and consumer multimedia - resulted in a record 30 million units shipped in the third quarter with CEVA technology embedded as our licensees continue to thrive in the DSP industry," said Chet Silvestri, President and CEO of CEVA. "Although it is traditionally our weakest quarter, CEVA's revenue, gross margin and net income all recorded sequential improvements. Furthermore, our strong cash position gives us the flexibility to pursue internal and external growth initiatives to further extend our position as the leading licensor of DSP technology."

During the third quarter, CEVA completed six new licensing agreements including another licensee for CEVA-X and good adoption of CEVA's Serial-ATA solutions. In addition, a major Japanese wireless player was the first to license CEVA's Mobile Media solution following the launch of the technology in the quarter.

Additionally, further industry endorsement for CEVA technologies was underscored in the third quarter with the announcements that Atmel adopted CEVA for storage solutions, Zoran for DVD systems, Japan Radio Consortium for radio solutions, and Nemerix for location solutions.

"Notwithstanding the more moderate growth expectations for the semiconductor sector, our product portfolio of cores, solutions and services positions us well to continue our momentum of revenue and profit growth," continued Chet Silvestri.

CEVA Conference Call

On October 27, 2004, CEVA management will conduct a conference call at 10:30 a.m. EST/15.30 p.m. London time, to discuss the operating performance for the quarter. To participate in the conference call, US domestic callers can dial 877-951-7311 and international callers can dial +44-20-7019-0810, access code "CEVA."

The conference call will also be available live via the Internet by accessing the CEVA web site at http://www.ceva-dsp.com/. Please go to the web site at least fifteen minutes prior to the call to register, download and install any necessary audio software.

For those who cannot access the live broadcast, a replay will be available by dialing 866-851-5345 for US domestic callers and +44-20-7108-6343 for international callers from two hours after the end of the call until 6:00 p.m. (ET) on November 3, 2004. The replay will also be available at CEVA's web site http://www.ceva-dsp.com/.

About CEVA, Inc.

Headquartered in San Jose, Calif., CEVA is the leading licensor of DSP cores and communications solutions to the semiconductor industry. CEVA markets a portfolio of DSP IPs in three integrated areas: CEVA DSPs, CEVA Xpert Open Framework Environment and CEVA Xpert Applications, all supported by Xpert Integration services. CEVA's technology has been embedded in over 70 million devices year-to-date 2004. CEVA was created through the merger of the DSP licensing division of DSP Group and Parthus Technologies. For more information visit http://www.ceva-dsp.com/.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, as well as assumptions that if they ever materialize or prove incorrect, could cause the results of CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The forward looking statements in this press release include statements concerning CEVA pursuing internal and external growth initiatives, market growth, and continued momentum of revenue and profit growth, and extending its position as the number one licensor of DSP solutions for the semiconductor industry. The risks, uncertainties and assumptions referred to above include macroeconomic and geopolitical trends and events; intense competition within our industry; the industries in which we license our technology have experienced a challenging period of slow growth; that the market for the sale of our technology may not develop as expected; that we rely significantly on revenue derived from a limited number of licensees; the possible loss of key employees and/or senior management; the challenges of managing a geographically dispersed operation and other risks that are described from time to time in the Company's Securities and Exchange Commission reports, including but not limited to the Annual Report on Form 10- K for the fiscal year ended December 31, 2003, and reports filed after the Form 10-K. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

                     CEVA, INC. AND ITS SUBSIDIARIES
             U.S. dollars in thousands, except per share data

                        Quarter ended    Nine months ended    Quarter ended
                         September 30,       September 30,       June 30,
                        2004       2003     2004      2003         2004
                     Unaudited  Unaudited Unaudited Unaudited   Unaudited
   Licensing and
    royalties           $8,482     $7,651   $24,431   $21,802      $8,180
   Other revenue         1,232      1,651     4,073     5,430       1,396

  Total revenues         9,714      9,302    28,504    27,232       9,576

  Cost of revenues       1,199      1,415     4,160     4,654       1,451

  Gross profit           8,515      7,887    24,344    22,578       8,125

  Operating expenses:
    Research and
     development, net    4,384      4,490    12,615    12,591        4,222
        Sales  and
          marketing                      1,768            1,436          5,159          4,258              1,718
        General  and
          administrative            1,555            1,455          4,509          4,418              1,495
        Amortization  of
          intangible  assets          223                288              669              856                  223
      and  severance  charge            -            1,402                  -          2,782                      -

    Total  operating
      expenses                            7,930            9,071        22,952        24,905              7,658

      income  (loss)                      585          (1,184)        1,392        (2,327)                467
    Other  income,  net                145                150              496                  7                  162

    Income  (loss)  before
      taxes  on  income                  730          (1,034)        1,888        (2,320)                629
    Taxes  on  income                    170                100              425              100                  135

    Net  income  (loss)                560          (1,134)        1,463        (2,420)                494

    Basic  income
    (loss)  per  share            $0.030        ($0.063)      $0.080      $(0.134)          $0.027
    Diluted  income
      per  share                        $0.030        ($0.063)      $0.077      $(0.134)          $0.026
    Weighted  average
      number  of  Common
      Stock  used  in
      computation  of
      net  income(loss)
      per  share:
    Basic                                18,453            18,108        18,387        18,085            18,380
    Diluted                            18,793            18,108        18,986        18,085            18,909

                                          CEVA,  INC.  AND  ITS  SUBSIDIARIES
                                    CONDENSED  CONSOLIDATED  BALANCE  SHEETS
                                                U.S.  dollars  in  thousands

                                                                September  30,      December  31,      June  30,
                                                                      2004                      2003(1)              2004
                                                                  Unaudited                                        Unaudited
    Current  assets:
        Cash  and  cash  equivalents          $27,035                  $59,130              $56,832
        Marketable  securities                    30,730                              -                          -
        Trade  receivables,  net                  11,583                    10,226                10,707
        Other  assets  and
          prepaid  expenses                              1,591                      1,945                  1,757
    Total  current  assets                          70,939                    71,301                69,296
    Long-term  investments:
        Severance  pay  fund                            1,534                      1,487                  1,458

    Property  and  equipment,  net              4,690                      4,792                  5,211
    Goodwill                                                  38,398                    38,398                38,398
    Other  intangible  assets,  net            2,786                      3,455                  3,009
    Total  assets                                      $118,347                $119,433            $117,372

    Current  liabilities:
        Trade  payables                                  $1,881                    $3,030                $2,018
        Accrued  expenses
          and  other  payables                          9,604                    12,876                10,053
        Taxes  payable                                          965                          891                      737
        Deferred  revenues                              1,046                      1,064                      775
    Total  current  liabilities                13,496                    17,861                13,583
    Long-term  liabilities:
        Accrued  severance  pay                      1,609                      1,510                  1,530
        Accrued  liabilities                          1,229                      1,583                  1,293
                                                                        2,838                      3,093                  2,823
    Stockholders'  equity:
    Common  Stock:                                                18                            18                        18
    Additional  paid  in  capital            136,520                  134,449              136,033
    Accumulated  deficit                          (34,525)                (35,988)            (35,085)
    Total  stockholders'  equity            102,013                    98,479              100,966
    Total  liabilities
      and  stockholders'  equity            $118,347                $119,433            $117,372

      (1)  The  December  31,  2003  balance  sheet  information  has  been  derived  from
              the  December  31,  2003  audited  consolidated  financial  statements  of
              the  Company.

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