DSET Announces Q4 2000 Earnings Estimates

Bridgewater, NJ - December 27, 2000 - (Nasdaq: DSET) - DSET Corporation announced today that it expects revenues for the fourth quarter of 2000 of between $4.0 million and $6.0 million and a net loss of between $11.5 million and $13.5 million. This would translate to a loss per share of between $1.00 and $1.15.

As part of this announcement, DSET will provide approximately $6.5 million of reserves for bad debts due to continued financing difficulties at several of the company's current customers. In this quarter, the company will also provide up to a $1.0 million reserve for restructuring charges incurred in conjunction with consolidation of its product development centers.

DSET expects to have approximately $33.0 million in cash, cash equivalents, and marketable securities at year-end 2000.

Management Analysis for Q4 2000

Our performance in the fourth quarter of 2000 was driven by three key factors:

• Almost all of our prospective customers delayed the decision to purchase gateways until sometime in 2001.
  
  
• Current customers experienced difficulties in securing additional funding.
  
  
• Some current customers declared bankruptcy.
  

The decision to buy gateways is almost always made after the implementation of billing and order-management systems. We believe that our prospective customers will continue to delay the acquisition of gateway products needed to create electronic Trading Partner Networks until they have their billing and order-management systems in production and the current financing climate improves.

There are two primary reasons for our having to make an additional provision for bad debts. Two more of our customers have declared bankruptcy, and other customers have indicated their inability to pay us for the foreseeable future because of uncertainty about obtaining additional financing.

We have already taken steps to reduce expenses. We are consolidating our development centers in Plano, Texas, and Toronto; and we have finalized the transition of our application development tools to a company that will continue to enhance, sell, and support them. This agreement with NE Technologies was consummated on December 23, 2000 and will provide DSET's customers with a path for additional product support and development. We also are in the final stages of selling our Chinese subsidiary to a company that will focus on building applications for the telecommunications markets in China, Taiwan, and Singapore.

All of these efforts are aimed at getting our expenses in line with our potential revenues and helping the company to focus on the key value drivers in our business ¾ building Trading Partner Networks for competitive service providers.

We are encouraged by a recent report from a leading telecom-market research group, which forecasts a market that is larger than we had predicted. We are also confident in our current competitive position in this market and in our ability to expand our product line to take advantage of new opportunities as the market continues its transformation.

At this time, though, investors have limited confidence in the CLEC market's ability to remain viable. We believe that the current price of our stock is an indication of this perception.

In light of all these circumstances, we are exploring ways to diversify beyond the CLEC marketplace — including strategic alliances, mergers, acquisitions, and the development of new products for different customers — while still remaining inside the telecommunications industry.

Our previous guidance for 2001 was $60 million to $65 million in revenues, resulting in an EPS range of $0.45 to $0.55. We are rescinding this guidance and will provide new guidance for 2001 when the telecom market begins to settle down. There is too much uncertainty surrounding the telecom industry to accurately forecast our financial performance at this time. We believe that we will be able to give reasonable guidance for 2001 sometime in the first quarter of the year.

Our commitment is to run a profitable company, even if the revenue numbers are significantly below what we thought they would be just three months ago. We recognize that our cash is a valuable asset and will make the difficult choices necessary to ensure that we utilize this asset effectively.

Other Events

Our senior vice president of sales and marketing, Phillip Cavallo, has decided to leave DSET and has accepted a position as CEO of a company in Silicon Valley. Phil has done a great job in helping to establish DSET as the leading supplier of OSS interconnection gateways, and we will miss him dearly. We wish Phil all the best in his new job. William P. McHale, Jr., our president and CEO, will take on the added responsibilities as the acting head of sales and marketing.

Conference Call on Thursday, December 28, 2000

DSET Corporation will hold a conference call to discuss preliminary financial results for the fourth quarter of 2000 at 10:00 AM Eastern time on Thursday, December 28, 2000.

Investors can listen to a live Webcast of the conference call at www.StreetFusion.com. The DSET Web site, www.dset.com, will also have a direct link to the conference-call broadcast at this site. Listeners should go to the Web site at least 15 minutes prior to the call to download and install any necessary audio software.

For those who cannot listen to the live Webcast, the teleconference will be archived on both the DSET and Street Fusion sites for 30 days. In addition, you may also listen to the playback of the call after 8:30 PM by dialing 1-800-475-6701, access code 561298 through January 4, 2001.

About DSET

DSET Corporation is a leading supplier of software and services that enable telecommunications providers to rapidly implement electronic Trading Partner Networks, which significantly reduce the time required to provision services for customers and resolve service outages to maintain high service quality and ensure customer retention. DSET is headquartered in Bridgewater, New Jersey, and the company's Web site can be viewed at www.dset.com.

Statements regarding financial matters contained in this press release, other than historical facts, are forward-looking. Since all statements about DSET's plans, estimates, and expectations are based on current projections that involve risks and uncertainties, and are subject to change at any time, the company's actual results may differ materially from expected results. Investors should consider these risks and uncertainties, which are discussed in documents filed by DSET with the Securities and Exchange Commission. These documents identify important factors that could cause the actual results to differ materially from those contained in the projections or forward-looking statements. DSET expressly disclaims any obligation to update any forward-looking statements.