Gary Levine
Chief Financial Officer 
CSP Inc.
Tel: (978) 663-7598 ext. 1200 
Fax: (978) 663- 0150
glevine@cspi.com

For the first quarter of fiscal 2003 ended December 31, 2002, CSP Inc. reported a 25 percent increase in sales to $8.2 million compared with $6.5 million for the year-earlier quarter. The Company also narrowed its net loss to $395,000, or $(0.11) per share, compared with a net loss of $943,000, or $(0.27) per share, for the first quarter of fiscal 2002. The first-quarter fiscal 2002 net loss included a $118,000 charge related to severance.

Comments on the First-Quarter

"Improved performance by our MODCOMP subsidiary drove CSP’s year-over-year increase in sales for the first quarter," said Alexander R. Lupinetti, CSP chairman, president and chief executive officer. "A 55 percent increase in MODCOMP’s sales resulted primarily from several outsourcing projects with large European telecommunications providers to build their infrastructures and enhance the efficiencies of their IT systems. We expect to see more projects from time-to-time throughout the year as many service providers are beginning to invest in system upgrades that can no longer be postponed. "

"During the quarter, we also saw increased interest in MODCOMP’s network security solutions," said Lupinetti. "We have 18 customers in Germany who are using MODCOMP because of its experience and expertise in network management and its excellent relationships with key security software and hardware suppliers. These customers are putting their trust in MODCOMP to build their firewalls, virtual private networks and intrusion detection devices. We are optimistic that this business will result in a predictable, recurring revenue stream as customers turn to MODCOMP to manage their network security systems. During the next few quarters, we plan to expand our network security services to the U.S. and U.K. markets.".

"CSP’s Multicomputer division continued to be affected by certain U.S. Department of Defense program delays," said Lupinetti. "We are hopeful that the growing awareness of the benefits of open-source digital signal processing and customer interest in our Linux-based FastCluster MultiComputer Systems will result in long-term growth for this business."

Outlook

"We expect certain defense program delays will affect the results of our Multicomputer business throughout fiscal 2003," continued Lupinetti. "While IT spending remains very constrained, our sales pipeline and a building customer interest for our wide range of IT outsourcing solutions give us reason for optimism for the fiscal year. We plan to continue to make strategic investments across our businesses in order to capitalize on opportunities when our markets rebound."

Safe Harbor Statement
The Company wishes to take advantage of the 'safe harbor' provisions of the Private Securities Litigation Reform Act of 1995 (the Act) with respect to statements that may be deemed to be forward-looking statements under the Act. Such forward-looking statements may include, but are not limited to, statements regarding expectations for the Company's future MultiComputer sales, future demands for IT solutions, service integration demand from European telecommunications providers, continued investments in new product development, and the long-term growth of the Company. The Company cautions that numerous factors could cause actual results to differ materially from any forward-looking statements made by the Company. Such risks include general economic conditions, market factors, competitive factors and pricing pressures, and others described in the Company's filings with the SEC. Please refer to the section on forward-looking statements included in the Company's 10-K filed with the Securities and Exchange Commission.