DSET Reports EPS Up 63%; Revenue Up 50%.

BRIDGEWATER, N.J.--(BUSINESS WIRE)--Oct. 27, 1998--DSET Corporation (NASDAQ: DSET) reported today record quarterly revenues and net income for its quarter ended September 30, 1998.

It was the Company's 22nd consecutive profitable quarter.

Total revenues for the quarter were $7,822,000, compared to $5,189,000 for the corresponding 1997 quarter, a 51% increase. Revenue from licenses for the quarter was $3,707,000, compared to $2,654,000 for the corresponding 1997 quarter; and services revenue for the quarter was $4,115,000, compared to $2,535,000 for the corresponding 1997 quarter.

Net income for the quarter was $1,544,000, or $0.13 per share, assuming dilution, as compared to $660,000, or $0.08 per share, assuming dilution, in the same quarter last year. Net income and earnings per share increased even though a greater number of shares were outstanding, primarily as a result of the Company's March 1998 initial public offering. Net income increased by 134% while earnings per share increased 63%.

Revenues for the nine months ended September 30, 1998 increased 50% to $20,084,000 as compared to $13,421,000 in the prior year. Net income for the nine-month period was $2,887,000, or $0.26 per share, assuming dilution, as compared with $1,647,000, or $0.20 per share, assuming dilution, last year. Revenue for licenses increased by 49% and services were up 50% for the nine-month period as compared to the prior year.

"We are pleased with our quarterly performance in many segments," said Bill McHale, DSET's president and chief executive officer. "Our core business from network equipment vendors showed a 44% growth in agent toolkits and a 47% growth in services revenue, driven by custom application development for leading datacomm vendors preparing to offer high-speed Internet access solutions to the carriers.

"Our initial efforts in the OSS gateway business, targeted at the CLEC's (competitive local exchange carriers) produced almost $1 million in revenue, a combination of licenses and custom gateway development for some of the leading CLEC's.

"Additionally, our organizational focus continues to sharpen on each customer set, so we can deliver the necessary solutions quickly and profitably.

"Finally, as we have stated previously, we continue to feel confident about our fiscal year budgets."

DSET, focused solely on the telecommunications industry, is a leading provider of application development tools, custom application development services, Local Number Portability (LNP) solutions and Gateway products for interconnecting OSS's among multiple carriers. Telecom equipment vendors use the Company's software tools to build network management applications that remotely manage network devices and provision new services across wireline, wireless or broadband networks. Carriers use the Company's LNP and OSS gateways to facilitate the flow of information between OSS's.

Carriers and equipment vendors also contract with DSET's Professional Services organization to provide custom application development services to build either network management applications, LNP solutions or Gateway products for OSS interconnection.

The Company is traded on NASDAQ under the symbol "DSET" and its web site can be reached at http://www.dset.com.

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 that 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 risks associated with carrier-to-carrier applications. DSET undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise. -0-

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


                                      Quarter Ended   Nine Months Ended
                                       September 30      September 30

                                       1998    1997      1998    1997

Revenues:
License revenues                      $3,707  $2,654   $ 9,923  $6,660
Service revenues                       4,115   2,535    10,161   6,761
     Total revenues                    7,822   5,189    20,084  13,421


Cost of revenues:
License revenues                         393     375     1,147     964
Service revenues                       1,220   1,117     2,854   2,632
     Total cost of revenues            1,613   1,492     4,001   3,596
Gross profit                           6,209   3,697    16,083   9,825

Operating expenses:
Sales and marketing                    2,297   1,286     6,393   3,261
Research and product development       1,496     754     4,596   2,239
General and administrative               600     707     1,777   1,945
     Total operating expenses          4,393   2,747    12,766   7,445

Operating income                       1,816     950     3,317   2,380
Interest income and other
  income/expenses, net                   577      34     1,202      76
Income before income taxes             2,393     984     4,519   2,456
Provision for income taxes               849     324     1,632     809
Net income                            $1,544    $660    $2,887  $1,647
Less: accrued preferred stock
  dividends                               --     215        --     645
Net income applicable to common
  shares                              $1,544    $445    $2,887  $1,002
                                      ==============    ==============
Net income per common share            $0.16   $0.12     $0.33   $0.28
                                      ==============    ==============
Weighted average number of common
  shares outstanding                   9,556   3,611     8,757   3,518
                                      ==============    ==============
Net income per common share assuming
  dilution                             $0.13   $0.08     $0.26   $0.20
                                      ==============    ==============
Weighted average number of common
  shares and common equivalent
  shares outstanding                  11,452   8,358    10,913   8,122
                                      ==============    ==============

                           DSET Corporation
                      Consolidated Balance Sheets
                    (In $000 except per-share data)
                              (unaudited)
                                           September 30, September 30,
                                               1998          1997
                 Assets

Current assets:
   Cash and cash equivalents                 $ 4,533        $   898
   Marketable securities                      40,381          1,557
   Accounts receivable, net                    6,873          6,813
   Deferred income taxes                         159             30
   Prepaid expenses and other current assets      70            125
     Total current assets                     52,016          9,423

Fixed assets, net                              1,684          1,451
Goodwill, net                                    139            177
Other assets                                     434            423
     Total assets                            $54,273        $11,474

       Liabilities, Cumulative Redeemable Convertible Preferred
               Stock and Shareholders' Equity (Deficit)

Current liabilities:
   Accounts payable and accrued expenses    $  3,345       $  2,699
   Income taxes payable                          600            131
   Deferred revenues                           1,587          1,001
   Note payable                                  167            220

     Total current liabilities                 5,699          4,051

Deferred income taxes                            104             60
Note payable                                     --             167
      Total liabilities                        5,803          4,278

Commitments

Series A cumulative redeemable
 convertible preferred stock                     --          11,346
Shareholders' equity (deficit):
Common stock                                  41,364          1,476
Deferred stock compensation                     (630)           --
Retained earnings                              7,650          4,373
Unrealized appreciation on investments            86            --
Treasury stock                                   --          (9,999)
Total shareholders' equity (deficit)          48,470         (4,150)
Total liabilities, cumulative redeemable
  convertible preferred stock and
  shareholders' equity (deficit)            $ 54,273       $ 11,474