DSET Management Comments on Fourth Quarter Margin Results.

BRIDGEWATER, N.J.--(BUSINESS WIRE)--Feb. 16, 1999--(NASDAQ: DSET) --In response to inquiries about DSET's margins released for the fourth quarter of 1998, Bill McHale, DSET's president and chief executive officer, stated that the company misclassified expenses resulting in a lower than expected service margin in Q4.

"When we announced our unaudited results on February 4, 1999, our Q4 1998 services margin was 47%. As a result of additional research, we discovered approximately $600,000 of improperly classified expenses. When properly classified, the following resulted:

1. There were no adjustments to revenue or EPS.

2. Service margins for Q4 1998 increased from 47% to 70%, consistent

with service margins from the three previous quarters in 1998.

3. Total gross margins increased from 81% to 84%.

4. License margins were adjusted from 95% to 90%.

5. Operating expenses for R+D increased from 15% of quarterly

revenue to 18%."

"We just finished a fantastic year where we grew sales over 50% and nearly doubled our net income. We did an excellent job in providing solutions to three key market segments that are the bellwethers for our continued success. These three segments are: 1) connecting high speed data network devices to the public switched telephone network; 2) the local number portability market; 3) electronic bonding gateways to interconnect the new competitive local exchange carriers with the incumbent local exchange carriers."

"As stated on our analyst/investor conference call on February 4, 1999, we secured orders from key datacom equipment vendors and had record sales of local number portability licenses and services. We also started selling ILEC in a Box, our six pack of electronic bonding gateways. We received orders for ILEC in a Box from 3 carriers that totaled over 3 million dollars. Only 50% of the total dollar amount of the orders were recognized as revenue in Q4 1998."

"Additionally, comments in our fourth quarter earnings release about the acquisition of certain assets of Network Programs, LLC, (NPL), and its effect on EPS for 1999, may have been misinterpreted by some investors."

"The company anticipates the following:

1. The NPL transaction will be accretive to earnings for the third

and fourth quarters of 1999, as well as the full year.

2. The NPL transaction is expected to be dilutive to earnings per

share to the extent of two (2) to three (3) cents in the first

quarter and one (1) to two (2) cents in the second quarter. Even

in light of this dilution, we still expect to post favorable

earnings for every quarter of 1999."

"The company believes the NPL transaction will allow us to make ILEC in a Box an even more competitive offering because it provides a solution for the pre-ordering process, that our competitors have not addressed."

"Our management team is confident in the outlook for 1999. We expect to have an excellent year in our core business by providing a variety of new solutions to our historical customer base, the network equipment vendors. And we believe that we will be successful in establishing a new customer base, competitive local exchange carriers, as a result of our leadership in the electronic bonding gateway market."

About DSET:

DSET Corporation, founded in 1989, is a leading provider of software and services to the telecommunications industry. The company's application development tools are used by network equipment manufacturers around the world to build applications that manage network components and facilitate the provisioning of new services, such as voice, data, and Internet access. DSET's local number portability (LNP) and OSS interconnection solutions facilitate the flow of information between carriers and their respective operations support systems (OSS). The company's services include custom application development, consulting to engineering teams and OSS process teams, as well as interoperability testing, maintenance, and training.

Except for historical and factual information contained herein, all other information set forth in this news release represents forward-looking statements, including all statements about DSET's plans, beliefs, estimates and expectations. These statements are based on current estimates and projections that involve certain risks and uncertainties and could cause actual results to differ materially from those in the forward-looking statements. Investors are encouraged to consider these risks and uncertainties which are discussed in documents filed by DSET with the Securities and Exchange Commission, including, without limitation, fluctuation of quarterly operating results, dependence on a rapidly evolving telecommunications industry, dependence on the TMN industry standard, and the buying patterns of competitive local exchange carriers. DSET undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

DSET's web site can be viewed at www.dset.com.

DSET and the DSET logo are registered trademarks of DSET Corporation. -0-

                           DSET CORPORATION
                   CONSOLIDATED STATEMENTS OF INCOME
                    (In $000 except per-share data)

                                Quarter Ended For the Year Ended
                                         31 December 31

                             1998     1997         1998     1997

Revenues:
License revenues            $6,414   $4,190      $16,338  $10,850
Service revenues             2,792    1,754       12,952    8,515

     Total revenues          9,206    5,944       29,290   19,365

Cost of revenues:
License revenues               628      310        1,775    1,274
Service revenues               838      772        3,692    3,405

     Total cost of
      revenues               1,466    1,082        5,467    4,679

Gross profit                 7,740    4,862       23,823   14,686

Operating expenses:
Sales and marketing          2,800    1,726        9,193    4,986
Research and product
 develoPMENT                 1,640    1,060        6,237    3,299
General and administrative     931      936        2,708    2,881

     Total operating
      expenses               5,371    3,722       18,138   11,166


Operating income             2,369    1,140        5,685    3,520

Interest income and other
 income/expenses, net          466       50        1,670      126

Income before income taxes   2,835    1,190        7,355    3,646

Provision for income taxes     927      368        2,561    1,177

Net income                  $1,908     $822       $4,794    2,469

Less:  accrued preferred
 stock dividends                --      215           --      860

Net income applicable to
 common shares              $1,908     $607       $4,794   $1,609

Net income per common share  $0.20    $0.16        $0.53    $0.45

Weighted average number of
 common shares outstanding   9,777    3,713        9,012    3,567

Net income per common share
 assuming dilution           $0.17    $0.09        $0.43    $0.30

Weighted average number of
 common shares and
 common equivalent shares
 outstanding                11,435    9,019       11,043    8,346
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