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Direct readout dc SQUID electronics based on a liquid-nitrogen-cooled preamplifier and alternating current bias was developed. The preamplifier with an intrinsic voltage noise of 0.18 nV/Hz/sup 1/2/ was used as the first stage of this electronics. A mathematical description of the noise suppression by this electronics was done. Low-frequency noise was reduced by a factor of 6 at 1 Hz by this technique.