Signs Two New Contracts Worth $32 Million

Sunnyvale, CA, September 9, 2003 – Applied Signal Technology, Inc. (NASDAQ - APSG) announced today that it has signed two new contracts totaling $32 million. These multi-year contracts are for a variety of signal intelligence solutions and products.

Under the terms of one two-year contract, APSG will provide the government with the next generation of air borne signal intelligence (SIGINT) capabilities in support of military intelligence, surveillance, and reconnaissance (ISR) programs.

The terms of the other two-year contract requires APSG to perform a variety of engineering developments for enhanced SIGINT capabilities for the intelligence community.

Mr. Gary Yancey, President and Chief Executive Officer of the Company, commented, "Both of these contracts are significant to us for their value as well as future implications. The military contract is a first for the Company wherein we provide complete SIGINT system development and integration. This contract also provides continued product diversification in the military marketplace."

Mr. Yancey went on to say, “The other contract provides a number of enhancements to a variety of our current SIGINT products. This should result in additional, future orders for these product lines as well as several related products."

Applied Signal Technology, Inc. designs, develops, manufactures and markets advanced digital signal processing equipment to collect and process a wide range of telecommunications signals for signal reconnaissance applications. For additional Company-related information, visit the Company's website at www.appsig.com.

Except for historical information contained herein, matters discussed in this news release may contain forward-looking statements that involve risks and uncertainties. Statements as to the future spending by the U.S. Government on intelligence gathering; the future priority the U.S. Government may place on signal intelligence; the Company's plans for the future, including the steps it may take and the programs it will emphasize; the Company's beliefs concerning marketplace opportunities for its products and services; and beliefs concerning future product opportunities are forward-looking statements. The risks and uncertainties associated with these statements include whether orders will be issued by procurers, including the U. S. Government; the timing of any orders placed by procurers; whether the Company will be successful in obtaining contracts for these orders if they are forthcoming; whether any contracts obtained by the Company will be profitable; whether the Company will be able to successfully enhance its current products; whether the Company can successfully enter and maintain new marketplaces, and other risks detailed from time to time in the Company's SEC reports including its latest Form 10-K filed for the fiscal year ended October 31, 2002.