Despite this progress, Starboard Value, a New York-based investment advisor which owns approximately 10% of the company's shares, has threatened the company with a proxy fight for control of the board unless its demands are met. While DSP Group's board and management are doing everything possible to avoid a costly and distracting proxy contest, the board does not believe that Starboard's demands are in the best interests of the company or its shareholders, customers, or employees.

Even though Starboard already has two nominees on your board, Starboard is demanding extra seats on the board, significant representation on all board committees, an effective majority on the compensation committee, which would include half Starboard nominees and a Starboard chairman, as well as the formation of a new strategic committee, which would also include half Starboard nominees and a Starboard chairman.

Starboard has also called upon the company to cease work on the development of new products and to focus all of our resources on our legacy technology. We believe this demand shows a lack of understanding of the technology landscape, where companies must innovate or perish. The corporate graveyard is littered with tech companies that failed to improve and develop new products.

Starboard is also demanding that DSP Group put itself up for a quick sale, with a focus on short-term returns and undermining shareholder value that would be generated and realized in the mid-term by executing on the existing growth initiatives.