This document contains statements that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words "expect," "estimate," "anticipate," "predict," "believe" and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this document and include statements regarding the intent, belief or current expectations of NDS Group plc, its directors or its officers with respect to, among other things, trends affecting NDS Group plc's financial condition or results of operations. Unless otherwise indicated or unless the context requires otherwise, all reference herein to the "Company," "we," "our" and "us" refers to the NDS Group plc. Readers of this document are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Those risks and uncertainties are discussed under Item 1A. Risk Factors of Part II of this Quarterly Report on Form 10-Q, in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2007 as filed with the Securities and Exchange Commission ("SEC") on August 29, 2007 (SEC file no. 000-30364), as well as the information set forth elsewhere in this Quarterly Report. The Company does not ordinarily make projections of its future operating results and undertakes no obligation (and expressly disclaims any obligation) to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should carefully review other documents filed by the Company with the SEC. This section should be read in conjunction with the unaudited consolidated financial statements of the Company and related notes set forth elsewhere herein.

Introduction

Management's discussion and analysis of financial condition and results of operations is intended to help provide an understanding of our financial condition, changes in financial condition and results of operations, and is organized as follows:

· Overview of our business- This section provides a general description of our business and developments that have occurred to date during the fiscal year ending June 30, 2008 that we believe are important in understanding our results of operations and financial condition or to disclose known future trends.

· Results of operations- This section provides an analysis of our results of operations for the three- and nine-month periods ended March 31, 2008 and 2007. In addition, a brief description is provided of significant transactions and events that impact the comparability of the results being analyzed.

· Liquidity and capital resources- This section provides an analysis of our cash flows for the nine-month periods ended March 31, 2008 and 2007. It includes a discussion of the financial capacity available to fund our future commitments and obligations, as well as a discussion of other financing arrangements.

Overview of our Business

We supply open end-to-end digital technology and services to digital pay-television platform operators, and content providers. Our technologies include conditional access and microprocessor security, broadcast and broadband stream management, set-top box and residential gateway middleware, electronic program guides ("EPGs"), digital video recording ("DVR") technologies and interactive infrastructure and applications. Middleware and DVR technologies are deployed on third-party hardware devices, such as set-top boxes, residential gateway devices and PCs; we refer to these deployments as middleware clients and DVR clients, respectively. We provide technologies and services supporting standard definition and high definition television and a variety of industry, Internet and Internet protocol ("IP") standards, as well as technology for mobile devices. Our software systems, consultancy and systems integration services are focused on providing platform operators and content providers with technology to help them profit from the secure distribution of digital information and entertainment to consumer devices that incorporate various technologies supplied by us.

Our main customers are the digital pay-television platform operators that utilize a broadcast and/or a broadband infrastructure to deliver video and data to multiple subscribers. In addition, we may sell interactive applications to content providers, who do not usually operate a pay-TV platform, but instead provide content for transmission over a platform operator's network. The applications we sell to content providers make use of the functions and capabilities of the broadcast infrastructure.

We work with suppliers of other components of a broadcast and broadband platform, such as broadcast equipment, network equipment, set-top box and residential gateway manufacturers. We integrate our technologies with the products manufactured by these suppliers to provide a platform operator with the required functionality. A particular platform operator may purchase some components of their platform from our competitors.

Our customers consist of a limited number of large digital pay-television platform operators that are introducing, marketing and promoting products and services that utilize our technology. Our three largest customers are DIRECTV in the United States, BSkyB in the United Kingdom and SKY Italia in Italy. Together, these three customers contributed, directly and indirectly, approximately 62% of our revenue during the nine-month period ended March 31, 2008. We expect that a limited number of customers will continue to contribute a significant portion of our revenue. During the nine-month period ended March 31, 2008, we extended our contracts to supply conditional access services to DIRECTV and its Latin American subsidiaries through June 30, 2013.

We compete primarily with technologies such as NagraVision (developed by Kudelski SA), DigiCipher (developed by Motorola, Inc.), Power Key (developed by Scientific-Atlanta, Inc.), OpenTV (developed by OpenTV Corp., a company controlled by Kudelski SA) and Microsoft Mediaroom (developed by Microsoft Corporation) both to attract new customers and to retain our existing customers. In addition, some of the companies that currently operate in the set-top box and/or software business, but that have not historically been active competitors of ours, may, through acquisitions or the development of their own resources, seek to enter and obtain significant market share in our current or planned business areas.

A significant portion of our revenue is dependent upon our customers' subscriber bases, the growth in their subscriber bases and the related quantities of set-top boxes deployed to their subscribers. Revenue can vary from period to period as our revenue reflects a small number of relatively large orders for our technology and services. These generally have long sales and order cycles, and delivery and acceptance of our products and services fluctuate over the course of these cycles. Our accounting policies often require us to defer revenue until after our technologies have been deployed by our customers or to recognize contract revenue over the term of any post-contract support period.

We consider that we operate and manage our business as a single segment. There are no separate divisions or profit centers. We assess the financial performance of our business by reviewing specific revenue streams in the aggregate and by customer. We assess our costs by considering individual cost centers and their aggregation into the general cost categories as described below.

Revenue

We derive revenue primarily from:

1) Fees from the sale of smart cards and the provision of security maintenance services. These fees are typically based on the number of smart cards supplied and the number of subscribers and/or smart cards authorized for a particular platform. Our fees may be reduced if the security of the system is compromised. We refer to fees from the sales of smart cards and the provision of security maintenance services as "conditional access revenue."

2) Fees for the supply of an initial system and subsequent additional functionality and maintenance services. These fees are typically based on the amount of manpower required to customize, integrate and install the system components and subsequently to maintain those components. We refer to such fees as "integration, development and support revenue."

3) Fees linked to the deployment and use of our technologies. These fees are typically based on the number of set-top boxes or residential gateway devices manufactured or deployed that contain the relevant technologies. Other fees may be based on the extent to which the technologies are used by our customers' subscribers. For example, we may receive a share of incremental revenue generated by a platform operator or content provider from an application that incorporates our technologies. We refer to such fees as "license fees and royalties."

These different types of fees are presented as three separate revenue streams in our consolidated statement of operations because they are influenced by different external factors.

We distinguish between revenue from "established technologies" and revenue from "new technologies." We categorize as revenue from established technologies our revenue from conditional access, middleware and EPG technologies and fees from the customization and integration of those technologies into head-end systems and set-top boxes, together with associated support. Revenue from these technologies is allocated between the three different revenue streams identified above. We aggregate under our separate new technologies revenue stream all revenue that we derive from DVR technologies, advanced middleware technologies, technologies involving broadband and video content over broadband ("IPTV"), interactive infrastructure and applications, mobile TV and games and gaming. As our business develops, we will consider whether these groupings of revenue remain appropriate.

Costs and Expenses

Our costs and expenses consist of physical and processing costs of smart cards; personnel, travel and facilities costs; royalties paid for the right to use and sub-license certain intellectual property rights owned by third parties; legal costs; and the amortization of intangible assets, such as intellectual property rights that we have acquired for incorporation within our technologies.

The physical costs of smart cards include the costs of the integrated circuits manufactured by third-party suppliers, the micro-module that houses the computer chips and the plastic body of the smart cards. We do not manufacture smart cards, but our engineers design computer chips that are embedded into the smart cards. We arrange for the computer chips to be manufactured and assembled by third-party suppliers. Smart card costs are dependent upon the costs of raw materials, including the cost of computer chips, plastic and assembly, and the quantity of smart cards purchased and processed in any period.

Personnel, travel and facilities costs are allocated into four categories:
operations, research and development, sales and marketing, and general and administration. We have employees and facilities in the United Kingdom, the United States, Israel, India, France, Denmark, Hong Kong, South Korea, China and Australia.

We classify operations costs as part of cost of goods and services sold. Operations costs include the costs of personnel and related costs, including an allocation of facilities costs, associated with our customer support and with the integration and development activities undertaken under a customer contract. Operations costs include the costs of operating our two smart card processing plants, including the depreciation of our smart card processing equipment.

Research and development costs consist mainly of personnel and related costs, including an allocation of facilities costs, attributable to our technical employees who are developing our technology and adapting it for specific customer requirements. These costs also include consumables and the depreciation of equipment used in development and test activities and are stated net of the benefit of grants and other incentives.

Sales and marketing costs mainly consist of personnel and related costs, including an allocation of facilities costs of our sales and marketing employees in the United Kingdom, Europe, the Middle East, the United States and the Asia-Pacific region. Marketing costs also include advertising, exhibitions, marketing communications and demonstration activities.

General and administration costs consist primarily of personnel, facilities and legal and administration costs.

Operating expenses include gains and losses recognized on cash holdings as a result of changes in foreign exchange rates.

Results of Operations

Commentary on the three- and nine-month periods ended March 31, 2008 versus the three- and nine-month periods ended March 31, 2007

Revenue

Revenue for the periods under review was as follows:

                                        For the three months ended
                                                March 31,
(in thousands)                            2008              2007          Change       % Change

Conditional access                   $      123,510    $      101,655   $   21,855             21 %
Integration, development & support           14,134             7,338        6,796             93 %
License fees & royalties                     30,675            27,122        3,553             13 %
New technologies                             43,781            40,953        2,828              7 %
Other                                         1,201             1,323         (122 )           (9 )%
Total revenue                        $      213,301    $      178,391   $   34,910             20 %

                                        For the nine months ended
                                                March 31,
(in thousands)                            2008              2007          Change       % Change

Conditional access                   $      364,504    $      292,686   $   71,818             25 %
Integration, development & support           37,887            38,433         (546 )           (1 )%
License fees & royalties                     88,680            74,922       13,758             18 %
New technologies                            137,621            97,374       40,247             41 %
Other                                         4,433             4,200          233              6 %
Total revenue                        $      633,125    $      507,615   $  125,510             25 %

Revenue comparisons for the fiscal 2008 periods to the fiscal 2007 periods were affected by the relative weakness of the U.S. dollar over the periods. Approximately 38% and 46% of our revenue was denominated in currencies other than the U.S. dollar, principally pounds sterling and euros, during the three- and nine-month periods ended March 31, 2008, respectively. We estimate that the weaker U.S. dollar favorably impacted our total revenue for the nine-month period ended March 31, 2008 by approximately $21 million, or 3%, compared to what would have been achieved had foreign exchange rates been consistent with those prevailing during the nine-month period ended March 31, 2007. Similarly, for the three-month period ended March 31, 2008, we estimate that the weaker U.S. dollar favorably impacted revenue by approximately $5 million, or 2%.

Revenue from conditional access increased by 21% and 25% during the three- and nine-month periods ended March 31, 2008, respectively, as compared to the three- and nine-month periods ended March 31, 2007. The increases were principally due to recognition of a portion of security services revenue previously deferred as certain remaining revenue recognition criteria were satisfied during the three- and nine-month periods ended March 31, 2008. Additionally, conditional access revenue rose due to increased security fees arising from the growth of the subscriber base of our customers, as well as an increase in customers and a higher volume of smart cards delivered to customers.

Authorized smart card activity in each period was as follows:

                                        For the three months ended           For the nine months ended
                                                 March 31,                           March 31,
(in millions)                             2008               2007             2008               2007

Number of authorized cards,
beginning of period                            82.7               69.9             75.4               65.0
Net additions                                   4.2                3.0             11.5                7.9
Number of authorized cards, end of
period                                         86.9               72.9             86.9               72.9

The quantity of smart cards delivered in each period was as follows:

                                        For the three months ended          For the nine months ended
                                                March 31,                           March 31,
(in millions)                             2008               2007            2008               2007

Number of smart cards delivered
for which revenue has been
recognized                                       8.8              6.3             24.0               19.4
Number of smart cards delivered
for which no revenue has been
recognized                                       1.8              0.1              2.9                0.2
Total number of smart cards
delivered                                       10.6              6.4             26.9               19.6

The increase in the number of smart cards delivered in the three- and nine-month periods ended March 31, 2008 as compared to the corresponding periods of the prior fiscal year principally reflects higher deliveries to existing customers and to new customers. The volume of smart cards supplied exceeded the increase in authorized smart cards in use due to a mixture of churn and the build-up of inventory by platform operators.

During the three- and nine-month periods ended March 31, 2008 we delivered significant quantities of smart cards to customers for which we have not recognized any revenue. These deliveries relate to new customers, primarily in Europe and Asia-Pacific, where our contractual arrangements include elements that were undelivered as of the balance sheet date and for which we do not have vendor-specific objective evidence of fair value. In accordance with our accounting policies, we are precluded from recognizing any revenue under such arrangements until all elements have been delivered, or until have vendor-specific objective evidence of the fair value of any undelivered elements. We expect to begin recognizing revenue from these contracts within 12 months. The cost of smart cards delivered for which no revenue has been recognized is included as a separate element of inventory in our consolidated balance sheets.

Integration, development and support revenue increased by 93% in the three-month period ended March 31, 2008 and decreased by 1% in the nine-month period ended March 31, 2008 as compared to the three- and nine-month periods ended March 31, 2007, respectively. The recognition of revenue from new customers and from the delivery of enhancements to several of our major customers is dependent on the timing of satisfaction of all revenue recognition criteria; therefore, this component of revenue may fluctuate from period to period. The increase in integration, development and support in the three-month period ended March 31, 2008 was primarily due to revenue recognition from the acceptance of a series of enhancements delivered to existing customers. The decline in integration, development and support revenue during the nine-month period ended March 31, 2008 was a consequence of the recognition and delivery in the prior year nine-month period of conditional access, EPG and middleware technologies to TataSky, which commenced broadcasting in India in the first quarter of fiscal 2006.

License fee and royalty revenue increased by 13% and 18% in the three- and nine-month periods ended March 31, 2008, respectively, as compared to the three- and nine-month periods ended March 31, 2007, principally resulting from higher conditional access and EPG royalties due to a higher number of set-top boxes deployed. Middleware royalties are driven by the number of middleware clients deployed. The table below sets forth the number of middleware clients deployed by our customers during each period:

                                        For the three months ended             For the nine months ended
                                                 March 31,                             March 31,
(in millions)                             2008               2007               2008               2007

Number of middleware clients                   76.4               52.2 (1)           61.8               41.6
deployed, beginning of period
Acquisitions                                      -                  -                  -                2.0 (1)
Additions                                       6.7                5.1               21.3               13.7
Number of middleware clients                   83.1               57.3               83.1               57.3
deployed, end of period

The increase in revenue from new technologies of 7% and 41% in the three- and nine-month periods ended March 31, 2008, respectively, compared to the three- and nine-month periods ended March 31, 2007, was principally due to higher revenue from our advanced middleware, IPTV, gaming applications and residential gateway devices. Revenue from our DVR technologies and advanced middleware is driven by the number of DVR clients deployed and the level of integration and development revenue recognized. The table below sets forth the cumulative number of DVR clients deployed during each period:

                                        For the three months ended         For the nine months ended
                                                March 31,                          March 31,
(in millions)                             2008               2007            2008              2007

Number of DVR clients deployed,
beginning of period                             10.4              5.3              7.3              3.5
Additions                                        1.7              1.1              4.8              2.9
Number of DVR clients deployed,
end of period                                   12.1              6.4             12.1              6.4

Cost of Goods and Services Sold and Gross Margin

Cost of goods and services sold and gross margin for the periods under review
were as follows:

                                             For the three months ended
                                                     March 31,
(in thousands)                                 2008              2007          Change        % Change

Cost of goods and services sold           $       86,817    $       70,573   $   16,244              23 %

Gross margin                              $      126,484    $      107,818   $   18,666              17 %
Gross margin as a percentage of revenue               59 %              60 %         (1 )%           **



--------------------------------------------------------------------------------
** Not meaningful.

                                             For the nine months ended
                                                     March 31,
(in thousands)                                 2008              2007          Change       % Change

Cost of goods and services sold           $      236,759    $      193,926   $   42,833             22 %

Gross margin                              $      396,366    $      313,689   $   82,677             26 %
Gross margin as a percentage of revenue               63 %              62 %          1 %           **

Cost of goods and services sold increased by 23% and 22% during the three- and nine-month periods ended March 31, 2008, respectively, as compared to the three- and nine-month periods ended March 31, 2007, principally due to an increase in the number of our employees working on development, integration and support activities, as well as increased royalties paid to third parties for the use of their technologies and higher deliveries of smart cards during the periods. The increases were partially offset by lower smart card unit costs.

Gross margin, defined as revenue less costs and expenses associated with that revenue (i.e., cost of goods and services sold), is a non-GAAP financial measure. We believe that gross margin is an important measure for our management and investors. We consider that it gives a measure of profitability that distinguishes between those costs that are broadly a function of direct revenue-earning activities and costs that are of a general nature or that are incurred in the expectation of being able to earn future revenue. Cost of goods and services sold excludes charges in respect of amortization of intellectual property rights and other finite-lived intangibles that we have acquired.

Gross margin as a percentage of revenue was 63% for the nine-month period ended March 31, 2008 as compared to 62% for the corresponding period of the prior fiscal year. For the three-month period ended March 31, 2008, gross margin as a percentage of revenue was 59% as compared to 60% for the corresponding period of the prior fiscal year. The effect of an increase in the total amount of employee costs allocated to cost of goods and services sold offset the revenue growth and in particular the impact of those elements of higher conditional access revenue and royalty revenue which had no associated direct costs.

Operating Expenses

Operating expenses for the periods under review were as follows:

                                 For the three months ended
                                         March 31,
(in thousands)                     2008              2007         Change     % Change

. . .