Ditech Networks Amends Preferred Stock Purchase Rights Agreement in Order to Help Manage Net Operating Loss (NOL) Carryforward Assets

Ditech Networks (NASDAQ: DITC) today announced that its board of directors has amended the terms of the Ditech Networks, Inc. Rights Agreement, referred to as the "Rights Plan,” under which Ditech Networks initially distributed rights to holders of its outstanding common stock in 2001. The Rights Plan has been amended in an effort to deter acquisitions of Ditech Networks common stock that might limit or reduce the availability to Ditech Networks of its net operating loss carryforwards for United States federal income tax purposes (NOLs), which Ditech Networks believes is in the best interests of all stockholders. Existing stockholders will not be required to divest any shares of the company’s common stock acquired before the amendment became effective.

In addition to deterring acquisitions of Ditech Networks common stock that might limit or reduce the availability to Ditech Networks of its NOLs, the Rights Plan is designed to enable all Ditech Networks stockholders to realize the full value of their investment and to provide for fair and equal treatment for all stockholders in the event that an unsolicited attempt is made to acquire Ditech Networks. The amendment to the Rights Plan was adopted for the purpose of deterring acquisitions of Ditech Networks common stock that might limit or reduce the availability to Ditech Networks of its NOLs, and was not in response to an acquisition proposal.

The amendment to the Rights Plan provides that the rights will expire on March 25, 2011 (the expiration of the rights under the Rights Plan prior to amendment) unless the Ditech Networks stockholders approve the Rights Plan, as amended, prior to that date, in which case the rights will expire on July 7, 2013. The Rights Plan, as amended, provides that the rights will be exercisable only if a person or group acquires 4.99% percent or more of the Ditech Networks common stock or announces a tender offer for 4.99% or more of Ditech Networks common stock. If a person or group already owns 4.99% or more of Ditech Networks common stock, the rights will be exercisable only if that person or group acquires additional shares of Ditech Networks common stock. If a person or group acquires 4.99% or more of Ditech Networks common stock (or additional shares if the person or group already owns 4.99% or more of Ditech Networks common stock ), all rightsholders except the buyer will be entitled to purchase preferred stock of Ditech Networks, or to acquire Ditech Networks common stock at a discount. The effect will be to discourage acquisitions of 4.99% or more of Ditech Networks common without negotiations with the Ditech Networks’ board of directors.

The rights trade with Ditech Networks common, unless and until they are separated upon the occurrence of certain future events. Ditech Networks’ board of directors may terminate the Rights Plan at any time or redeem the rights prior to the time a person acquires more than 4.99% Ditech Networks common stock.

Additional information with respect to the Rights Plan, including the amendment, will be contained in the Current Report on Form 8-K that Ditech Networks is filing with the Securities and Exchange Commission. A copy of the Form 8-K can be obtained at the SEC’s Internet website at www.sec.com.

About Ditech Networks

Ditech Networks is revolutionizing modern communications with advanced voice processing solutions and voice applications that offer network and speech quality enhancement, voice call control, speech-powered web access, voice-to-text services, and more. Ditech believes in the power and simplicity of human speech. Its technology is designed to deliver compelling voice capabilities to emerging forms of communication like social networking and text messaging, allowing consumers to use voice in ways that make sense in today’s Web 2.0-savvy world.

Leveraging over 20 years of deployments with communications providers around the world, Ditech offers unique, effective products and services that put the subscriber’s experience first, assisting carriers with revenue generation, service differentiation, network expansion and call capacity. Ditech’s customers include Verizon, Sprint/Nextel, Orascom Telecom, AT&T, China Unicom, Global Crossing, and West Corporation. Ditech Networks is headquartered in Mountain View, California. For more information, visit www.ditechnetworks.com.