Hong Kong - November 10, 1997 - Deswell Industries, Inc. (Nasdaq: DSWLF and DSWWF) ( the "Company") today announced results for the second quarter and six months September 30, 1997.

Net sales for the quarter were $18.1 million, an increase of 81% compared to sales of $10.0 million in the second quarter ended September 30, 1996. Operating income increased 41% to $3.9 million, compared to $2.8 million in the previous year, and net income increased 52% to $3.2 million, compared to $2.1 million in the previous year. Earnings per share and fully diluted earnings per share increased 30% to $0.60 (based on 5,408,000 and 5,412,000 weighted average shares outstanding, respectively), compared to $0.46 (based on 4,568,000 weighted average shares outstanding) in the second quarter ended September 30, 1996.

Net sales for the six months ended September 30, 1997 were $32.7 million, an increase of 76% compared to sales of $18.5 million for the corresponding period in 1996. Operating income increased 49% to $7.2 million, compared to $4.8 million in the previous year, and net income increased 56% to $5.9 million, compared to $3.8 million in the previous year. Earnings per share and fully diluted earnings per share increased 34% to $1.11 (based on 5,320,000 and 5,335,000 weighted average shares outstanding respectively), compared to $0.83 (based on 4,568,000 weighted average shares outstanding) for the six months ended September 30, 1996.

Mr. Richard Lau, Chief Executive Officer, said, "I am pleased to report that Deswell's strong earnings growth continued during the second quarter. In addition to the continued steady increase in orders from our existing customers, the growth is also attributable to the increase in OEM sales in our electronic business. Over the past three months, the Company has invested approximately $1.2 million in machinery and equipment for our electronic and metallic operations in order to expand capacity and improve efficiency."

Mr. Lau concluded, "Our financial position continued to be strong. Cash and cash equivalents has increased to $19.1 million at September 30, 1997 compared to $12 million just six months prior. Working capital was $27.0 million as of September 30, 1997, versus 21.4 million as of March 31, 1997, and our current ratio was 4.7, with no long term debt."

Deswell manufactures injection-molded plastic parts and components, electronic products and subassemblies and metallic products for original equipment manufacturers ("OEMs") and contract manufacturers at its factories in the People's Republic of China. The Company produces a wide variety of plastic parts and components used in the manufacture of consumer and industrial products; printed circuit board assemblies using surface mount ("SMT"), and pin-through hole ("PHT") interconnection technologies; and finished products, such as telephones, telephone answering machines, sophisticated studio-quality audio equipment and consumer peripherals. The Company's customers include Mita Industries (H.K.) Limited, Nam Tai Electronics (Shenzen) Co. Ltd., Inter-Tel Incorporated, Behringer spezeiller studiotechnik GMBH, and Shakespeare (H.K.) Limited.

Click here to view accompanying tables and notes.