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Wave Systems’ Partners’ Shipment Volumes Rose Over 100% in Q3 2005 Versus Q2 2005, Expanding Wave’s Share of the Trusted Computing Marketplace

Lee, MA — November 9, 2005 — Wave Systems Corp. (NASDAQ: WAVX — www.wave.com) today reviewed recent corporate progress and reported results for its third quarter (Q3) ended September 30, 2005.

Reflecting growing deployment momentum in the trusted computing marketplace, Wave announced today that partner hardware shipments that included Wave’s licensed software had increased to approximately 2.33 million units per quarter during Q3 2005, compared to shipments of roughly 1.16 million units in Q2 2005. Wave earns a per-unit royalty based on trusted platform module (TPM) or motherboard shipments that include components of its EMBASSY® Trust Suite software.

Steven Sprague, Wave’s president and CEO, commented, "Shipments of trusted computing hardware accelerated substantially during the third quarter, driving increases in market penetration for Wave’s EMBASSY software. We believe that in this formative stage of the trusted computing market, building a strong installed base is our first priority as it drives brand awareness and creates a starting point for each end-user to upgrade their installed software and establish service relationships."

"Also during the quarter, we were pleased to solidify our relationship with Atmel, establishing another licensing relationship permitting our EMBASSY Security Center application to be supplied with their TPM product line. We were also gratified to be selected as the trusted computing software solution for Papa Gino’s Holdings, which conducted an extensive competitive review process prior to selecting the EMBASSY platform as the superior solution. We believe our EMBASSY Trust Suite 5.0, combined with our enterprise server solutions, enable PC end users and network administrators – from banks and retailers to government, enterprises and even consumers – to take advantage of this open industry standard to provide strong authentication, data protection and other security solutions."

Mr. Sprague added, "Going forward, we are actively supporting our channel partners in their efforts to secure enterprise and government trusted computing deployments. We are also continuing to invest in the enhancement of the distribution channel for our enterprise solutions. Our expectations are that volume growth will continue strongly in 2006. Wave continued its progress in the third quarter to secure deployment opportunities with both OEM and chip partners. We believe that Wave has an opportunity to be one of the market’s leading volume software providers, and we continue to invest in building solutions for managing and deploying trusted computing."

Wave’s Q3 2005 net revenue rose to $335,000, compared to Q3 2004 net revenue of $44,000 and an increase of 30 percent compared to Q2 2005 net revenues of $258,000, principally due to higher royalties related to increased shipments of Wave’s OEM customers’ products that include Wave software and technology. Wave reported a net loss of $4.4 million, or $0.05 per basic share, for the third quarter of 2005, compared to a net loss of $3.8 million, or $0.05 per basic share, in Q3 2004. The year-ago third quarter included the benefit of a $514,000 gain on the sale of marketable securities and a $283,000 benefit reflecting a decrease in the value of Wave’s liability for outstanding warrants containing cash settlement features. The weighted average number of basic shares outstanding in the third quarters of 2005 and 2004 was 85,100,000 and 69,633,000, respectively.

For the nine months ended September 30, 2005, Wave Systems reported net revenue rose over five-fold to $671,000, versus revenue of $101,000 for the nine month period ended September 30, 2004. Wave reported a net loss of $13.1 million, or $0.16 per basic share, for the first nine months of 2005, compared to a net loss of $11.5 million, or $0.17 per basic share, in the first nine months of 2004. The year-ago nine month period included a $2.9 million gain on the sale of marketable securities and a benefit of $633,000 reflecting a decrease in the value of Wave’s liability for outstanding warrants containing cash settlement features. The weighted average number of basic shares outstanding in the first nine months of 2005 and 2004 was 81,175,000 and 68,116,000, respectively.

As of September 30, 2005, Wave had total current assets of $3.1 million and no long-term debt.

Summary of recent progress:

(for more details, please visit www.wave.com ):

Wave Logo

About Wave Systems Corp.

Wave is a pioneer in hardware-based PC security that provides software to help solve critical enterprise PC security challenges such as data protection, strong authentication, network access control and the management of these enterprise functions.  Wave is a founding member of the Trusted Computing Group (TCG), a consortium of more than 100 companies that forged open standards for hardware security.  Wave’s EMBASSY® line of client- and server-side software leverages and manages the security functions of the TCG’s industry standard hardware security chip, the Trusted Platform Module (TPM) as well as hard drives that comply with TCG’s “Opal” self-encrypting drive (SED) standard.  Self-encrypting drives are a growing segment of the data protection market, offering increased security and better performance than most existing software-based encryption solutions.  TPMs are standard equipment on many enterprise-class PCs shipping today and have shipped on an estimated 300 million PCs worldwide.  Using TPMs and/or SEDs and Wave software, enterprises can substantially and cost-effectively strengthen their current security solutions.  Visit http://www.wave.com for more information.

Safe Harbor for Forward Looking Statements

Under the Private Securities Litigation Reform Act of 1995. This press release may contain forward-looking information within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), including all statements that are not statements of historical fact regarding the intent, belief or current expectations of the company, its directors or its officers with respect to, among other things: (i) the company’s financing plans; (ii) trends affecting the company’s financial condition or results of operations; (iii) the company’s growth strategy and operating strategy; and (iv) the declaration and payment of dividends. The words "may," "would," "will," "expect," "estimate," "anticipate," "believe," "intend" and similar expressions and variations thereof are intended to identify forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond the company’s ability to control, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors.

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This press release shall not constitute an offer to sell or a solicitation of an offer to buy any securities. No securities are being offered at this time.

For more information please contact:

Wave Contact:
Gerard T. Feeney, CFO
Wave Systems Corp.
413-243-1600
info@wave.com
Wave Investor Relations Contact
David Collins, Richard Land
Catalyst Global LLC
212-924-9800
wavx@catalyst-ir.com

 

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