Exhibit 99.2

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

TO:         ALL CURRENT SHAREHOLDERS OF DITECH NETWORKS, INC. (“DITECH” OR THE “COMPANY”) COMMON STOCK AS OF SEPTEMBER 29, 2009.

PLEASE TAKE NOTICE that the above-captioned consolidated shareholder derivative action, as well as the derivative action pending in the Superior Court of the State of California, County of Santa Clara, entitled Zhu v. Montgomery, et al., No. 1:06-CV-075695 (together, the “Actions”), are being settled and the parties have entered into a Stipulation and Agreement of Settlement dated September 29, 2009 (“Stipulation”).  The terms of the settlement set forth in the Stipulation include: (i) the adoption and/or implementation of a variety of corporate governance measures, including enhanced stock option granting and compliance procedures that relate to and address many of the underlying issues in the Actions, the separation of Chairman of the Board and CEO positions, and the appointment of a lead independent director; and (ii) Ditech’s payment of Plaintiffs’ counsel’s attorneys’ fees and expenses in the amount of $1.05 million.

IF YOU ARE A CURRENT OWNER OF DITECH COMMON STOCK, YOUR RIGHTS MAY BE AFFECTED BY PROCEEDINGS IN THE LITIGATION.

On                               , 2009, at           .m., a settlement hearing will be held before the United States District Court for the Northern District of California, 2112 Robert F. Peckham Federal Building and United States Courthouse, 280 South First Street, San Jose, CA 95113, to determine: (i) whether the terms of the settlement should be approved as fair, reasonable, and adequate; and (ii) whether the above-entitled action should be dismissed on the merits and with prejudice.

Any shareholder of Ditech that objects to the settlement of the Actions shall have a right to appear and to be heard at the settlement hearing, provided that he or she was a shareholder of record as of September 29, 2009.  Any shareholder of Ditech who satisfies this requirement may enter an appearance through counsel of such member’s own choosing and at such member’s own expense or may appear on his, her, or its own.  However, no shareholder of Ditech shall be heard at the settlement hearing unless, no later than fourteen (14) days prior to the date of the settlement hearing, such shareholder has filed with the Federal Court and delivered to Plaintiffs’ counsel and counsel for nominal party Ditech a written notice of objection, their grounds for objecting to the settlement, and proof of both their status as a shareholder and the dates of stock ownership in Ditech.  Only

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shareholders who have filed and delivered validly and timely written notices of objection will be entitled to be heard at the settlement hearing unless the Federal Court orders otherwise.

If you wish to object to the settlement, you must file a written objection setting forth the grounds for such an objection with the Federal Court on or before                     , with service on the following parties:

Inquiries may be made to Co-Lead Counsel: Eric. L Zagar, Barroway Topaz Kessler Meltzer & Check, LLP, 280 King of Prussia Road, Radnor, PA 19087, phone (610) 667-7706 or Rick Nelson, c/o Shareholder Relations, Coughlin Stoia Geller Rudman & Robbins LLP, 655 West Broadway, Suite 1900, San Diego, CA  92101, phone (800) 449-4900.

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