NDS Reports Full Year

NEW YORK and LONDON -- NDS Group plc ("NDS" or the "Company") (Nasdaq: NNDS - News), a majority-owned subsidiary of News Corporation that supplies open end-to-end digital technology and services to digital pay-television platform operations and content providers, announced today its results for the fiscal year ended June 30, 2007.

Commenting on NDS's performance, Dr. Abe Peled, Chairman and Chief Executive Officer of NDS said, "The transition to digital pay-television across the world is continuing to accelerate, changing the way people are entertained and informed worldwide. It is fueled by declining hardware prices for the underlying technologies and increasingly technology-literate and demanding consumers.

"NDS products and services that secure and enable the digital distribution of television are at the heart of this rapid change in the media landscape. We are pleased with our outstanding security record and with the adoption of our new technologies by our current customers, the most prominent being our DVR technology, now being shipped in 14 accounts across the world, with the fiscal 2007 number close to double the fiscal 2006 number. We are also gratified to see our investments in winning new platforms in Eastern Europe, China and India starting to translate into significant revenues and subscriber additions. Our middleware products have continued to gain acceptance in the marketplace and to outpace the competition. In addition, our Orbis subsidiary has performed very well, introducing new games and winning new customers.

"We have also made progress towards our vision of the convergence of broadcast and broadband delivery with the introduction of a number of pioneering new products, like VG DRM Key, as well as laid the foundation for integration in the home with the acquisition of Jungo. NDS continues to invest in better support for our customers, improving our current technologies and the development of new products and services that will enable our customers to benefit from the opportunities arising form the rapidly changing media distribution landscape."

Alex Gersh, Chief Financial Officer, commented, "2007 was another year of significant accomplishments for NDS. As we continue to invest additional resources to support our customers and develop new products, we stay focused on achieving our financial goals."

FINANCIAL REVIEW

Total revenue for the fiscal year ended June 30, 2007 was $709.5 million, an increase of 18% compared to the previous fiscal year.

The increase in conditional access revenues of 13% during the fiscal year ended June 30, 2007 as compared to the previous fiscal year was principally due to the increase in active subscribers and a higher volume of smart cards delivered to customers, especially to new customers in Europe, China and India. Integration, development and support revenues increased by 20% during the fiscal year ended June 30, 2007 as compared to the prior fiscal year, primarily because more projects in the fiscal year ended June 30, 2007 met our revenue recognition criteria as compared to the previous fiscal year. License fee and royalty revenues increased by 21% during the fiscal year ended June 30, 2007 as compared to the prior fiscal year, principally as a result of an increase in active subscribers due to an increase in the number of platform operators and services that deploy our technology. This increase was partially offset by a decrease in the number of middleware clients deployed during the fiscal year ended June 30, 2007 as compared to the fiscal year ended June 30, 2006. The volume of MediaHighway middleware clients deployed in the fiscal year ended June 30, 2006 was unusually high because DIRECTV commenced the initial download of our MediaHighway middleware and other of our related technologies to certain models of set-top boxes in use by their subscribers during that period. The increase in revenues from new technologies of 35% in the fiscal year ended June 30, 2007 compared to the prior fiscal year was principally due to higher revenues from DVR technologies and our advanced middleware, gaming applications and residential gateway devices. The former was largely a result of an increase in the cumulative number of DVR clients deployed in the fiscal year ended June 30, 2007.

In addition to the matters referred to above, comparisons of revenues for the fiscal year ended June 30, 2007 to the prior fiscal year were also affected by the relative weakness of the U.S. dollar over the periods. Approximately 50% of our revenues were denominated in currencies other than the U.S. dollar (principally pounds sterling and euros). We estimate that the weaker U.S. dollar has favorably impacted our total revenues for the fiscal year ended June 30, 2007 by approximately $26 million, or 4%, compared to the prior fiscal year.

Cost of goods and services sold increased by 11% during the fiscal year ended June 30, 2007 as compared to the prior fiscal year principally due to an increase in the number of our employees working on development, integration and support activities for our customers and, to a lesser extent, wage, salary and benefit increases during the period.

Our main operating expenses are employee costs (including the cost of equity-based awards), facilities costs, depreciation and travel costs. Our main operating expenses have increased primarily due to a higher number of employees and the related increase in payroll, employee travel and facilities costs. Employee costs were approximately 24% higher during the fiscal year ended June 30, 2007 as compared to the prior fiscal year. The increase in costs also reflects the full-year impact of investments made in new facilities and infrastructure during the latter part of the fiscal year ended June 30, 2006.

Research and development costs increased by 20% during the fiscal year ended June 30, 2007, compared to the prior fiscal year, principally as a result of a higher employee headcount due to more research and development being performed. Sales and marketing expenses increased by 35% in the fiscal year ended June 30, 2007 as compared to the prior fiscal year as a result of higher employee headcount and travel costs, increased attendance at trade shows and a higher level of corporate communications activities. General and administrative expenses increased by 30% in the fiscal year ended June 30, 2007, compared to the previous fiscal year, primarily due to increased facilities and infrastructure costs, legal expenses, equity compensation costs and business development costs.

In addition to the matters referred to above, comparisons of expenses for the fiscal year ended June 30, 2007 with the prior fiscal year were also affected by the relative weakness of the U.S. dollar. In the fiscal year ended June 30, 2007, approximately 72% of our total expenses were denominated in currencies other than the U.S. dollar (principally pounds sterling, Israeli shekels and euros). We estimate that the weaker U.S. dollar has increased our total expenses in the fiscal year ended June 30, 2007 by approximately $28 million, or 5%, compared to the prior fiscal year.

As a result of the factors outlined above, operating income was $160.4 million, or 22.6% of revenue, for the fiscal year ended June 30, 2007, compared to $130.7 million, or 21.7% of revenue, for the prior fiscal year. Net income for the fiscal year ended June 30, 2007 was $135.7 million, or $2.37 per share ($2.33 per share on a diluted basis), compared to $101.0 million, or $1.80 per share ($1.74 per share on a diluted basis), for the previous fiscal year. We estimate that the weaker U.S. dollar has reduced our operating income in the fiscal year ended June 30, 2007 by approximately $2 million compared to the fiscal year ended June 30, 2006 and that this has reduced our operating margin by approximately 1%.

As of June 30, 2007, we had cash and cash equivalents totaling $592.8 million. Our accumulated cash is being held with the intention of using it for the future development of the business and there are currently no plans to pay any dividends to shareholders. During the fiscal year ended June 30, 2007, we paid a net $83.2 million in respect of business acquisitions and had a decrease in short-term investments of $184.4 million, primarily as a result of the fact that our short-term investments matured and we did not reinvest such funds as longer-term deposits because the differential in interest rates between longer- and shorter-term deposits was negligible. We had a net inflow of cash and cash equivalents of $267.9 million during the fiscal year ended June 30, 2007, as compared to an outflow of $23.4 million during the prior fiscal year.

NDS Ltd.