UPDATE 1-Israel's DSP Group sees lower Q1 revenue, profit

Thu Jan 30, 2014 10:10am EST

* Q4 EPS $0.07 ex-items vs estimate of $0.06

* Q4 revenue down 8 pct to $35.3 million

* Sees Q1 revenue $30-$35 million, EPS of $0.01

* Shares down 4.1 pct in early Nasdaq trade

JERUSALEM, Jan 30 (Reuters) - Multimedia chip maker DSP Group projected a weaker first quarter after slowing demand for cordless phones continued to hurt sales in the fourth quarter.

DSP said on Thursday it earned 7 cents a diluted share excluding one-time items in the last three months of 2013, compared with 6 cents a share a year earlier. Revenue fell 8 percent to $35.3 million, which was in the middle of DSP's own forecast of $33-$37 million.

Israel-based DSP, which makes wireless chips for cordless DECT phones and other consumer telecom products, had also expected quarterly earnings per share of 3 cents ex-items.

"While the cordless telephony market continues to be in secular decline, we have been carefully managing our cost structure ... and prudently investing in important growth initiatives," said Ofer Elyakim, DSP's chief executive.

DSP forecast first quarter revenue of $30 million to $35 million, down from $39.7 million a year earlier, while earnings per shares are estimated to fall to 1 cent from 11 cents.

Shares of DSP were down 4.1 percent at $9.06 in early Nasdaq trading.

Elyakim said that in 2014, DSP would focus on enhancing shareholder value and generating positive operating cash flows.

"We are optimistic that the investments we have made in mobile, enterprise VoIP (voice over Internet protocol) and home automation will begin to bear fruit with growing revenues in these market segments in 2014 and beyond," he said.

During the fourth quarter, DSP signed a number of agreements including one with Panasonic, which launched a line of VoIP products based on DSP's chips.

In a conference call with analysts, Elyakim said DSP's noise reduction chip received strong interest from smartphone makers at the recent Consumer Electronics Show. The chip is in advanced trials with several manufacturers.

Device manufacturers are working to improve voice quality through new technologies, a trend DSP is expected to benefit from in coming quarters, Elyakim said.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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