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  "documentTitle": "DSP Group, Inc. (DSPG)",
  "authorId": "03_Starboard_Value",
  "authorName": "Starboard Value",
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  "presentationDate": "2013-05-13 00:00:00",
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  "notes": "Uses peer benchmarking to infer internal profitability metrics for a company that does not disclose them.",
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      "text": "SiTel’s historical operating expenses and margins, as well as other legacy semiconductor businesses, can be used to compute the profitability of DSP’s Digital Telephony business.",
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      "text": "HgCapital also disclosed that SiTel was spending approximately 15% of sales, or $15 million, in R&D at the time of the acquisition. Assuming a gross margin of approximately 43% during the time of the acquisition (similar to DSP), that would imply SG&A of approximately $9 million.",
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      "text": "Further, HgCapital disclosed that during that year, SiTel's business generated approximately $23 million in EBITDA, or 23% EBITDA margins. Assuming similar D&A as a % of revenue to DSP at the time, we estimate that SiTel generated Operating Income of approximately $19 million, or 19% operating margins.",
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      "text": "SiTel's historical operating expenses and margins, as well as other legacy semiconductor businesses, can be used to compute the profitability of DSP's Digital Telephony business.",
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      "text": "In 2005, SiTel Semiconductor disclosed the financials of its Digital Telephony business. At the time, National Semiconductor sold the business to HgCapital and disclosed that SiTel's business was approximately 5% of National Semiconductor's overall sales, or approximately $100 million.",
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      "text": "The sale of SiTel to Dialog Semiconductor in 2010 also highlights SiTel's financials in its 2011 Annual Report. From 2005 to 2011, SiTel increased its operating expenses to invest in new products to grow revenue but was still able to maintain 12% operating margins.",
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      "text": "Operating Margin: 19.0%",
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      "kind": "paragraph",
      "text": "While DSP does not specifically break out its core Digital Telephony business, an analysis of its closest competitor, SiTel Semiconductor, confirms that the business is highly profitable.",
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      "text": "Note: Digital Telephony revenue is not a defined term by DSP Group. Digital Telephony revenue is a Starboard estimate for legacy product revenue that excludes DSP's New Product Revenue. Note: SiTel 2011 financials excludes amortization of goodwill and intangibles.",
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      "text": "SiTel 2005 and 2011 Financials comparison table showing Revenue, Gross Margin, Gross Profit, R&D, SG&A, Total Operating Expenses, Operating Income, and Operating Margin.",
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      "kind": "title",
      "text": "However, DSP's Core Digital Telephony Business is Highly Profitable",
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