Following Shareholder Approval of Reverse Split Proposal,
 Wave’s Board Approves 1-for-3 Reverse Split

Lee, MA — July 25, 2006 — Wave Systems Corp. (NASDAQ: WAVX — announced that following shareholder approval at a special meeting held here yesterday, the Company’s Board of directors has approved a 1-for-3 reverse split of the Company’s Common Stock. The reverse stock split will be in effect at the commencement of trading tomorrow, July 26, 2006, with Wave’s Common Stock trading temporarily under the symbol "WAVXD." The reverse split is being implemented for purposes of regaining compliance with the $1.00 per share minimum closing bid price requirement for continued listing on the Nasdaq Global Market (previously known as the Nasdaq National Market). For each three (3) shares held, Wave shareholders will receive in exchange one (1) new share of Wave Systems common stock. Shareholders otherwise entitled to fractional shares as a result of the reverse stock split will receive cash payments in lieu of those fractional shares. Giving effect to the reverse split, the number of common shares issued and outstanding (Class A and Class B combined) will be reduced to approximately 36.3 million (from approximately 109 million). Shareholders’ percentage ownership in the Company will remain unchanged as a result of the reverse split.

Commenting on the reverse split and Wave’s listing status, Steven Sprague, CEO of Wave, said, "We are gratified that our shareholders strongly supported the Board’s view that the reverse stock split will help us to retain our listing on the Nasdaq Global Market. The Board has elected to pursue the 1-for-3 ratio as it should allow Wave to comfortably meet the $1 minimum bid price requirement. We continue to view continued listing on the Nasdaq Global Market as important to the strategic interests of our Company and its stockholders."

Earlier this month, Wave received notice that a Nasdaq Listing Qualifications Panel (the "Panel") granted Wave’s request for continued listing on the Nasdaq Global Market, subject to implementing the reverse stock split and meeting certain other conditions. On or before August 8, 2006, Wave’s minimum closing bid price must be at least $1 for a minimum period of 10 consecutive trading days. The Panel has reserved the right to extend the period of consecutive trading days or impose other conditions if, during the 10 day period (or longer period, if extended), the Panel determines that such conditions are required to demonstrate that Wave is able to maintain long-term compliance with the minimum bid price and other listing requirements. The Panel has also reserved the right to reconsider the terms of Wave’s continued listing based on other developments that would make continued listing inadvisable or unwarranted.
Wave believes that the reverse stock split will enable the Company to regain compliance with the $1 per share minimum closing bid price continued listing requirement. However, there can be no assurance that this result will be achieved or that Wave will maintain the listing of its common stock on the Nasdaq Global Market. Wave is currently in compliance with all other continued listing criteria for the Nasdaq Global Market.

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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 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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For more information please contact:

Gerard T. Feeney, CFO
Wave Systems Corp.
Wave Investor Relations Contact
David Collins, Richard Land
Catalyst Global LLC

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