Wave Systems and Deepnet Security Sign Licensing Agreement for Hardware-Based Security for Virtual Smart Cards

Next-Generation Security Chip Equips Cards with Strong Key Encryption

London, UK and Lee, MA — January 3, 2007 — Wave Systems Corp. (NASDAQ: WAVX) today announced that it has signed a licensing agreement with Deepnet Security, a leading provider of strong, two-factor authentication solutions, to permit Deepnet to arm Deepnet’s Smart ID™ virtual smart cards with Wave’s hardware-based security technology designed to protect users’ digital identities.

Wave’s technology is designed to enable the encryption keys used for and by Deepnet’s Smart ID virtual smart cards to be automatically generated and protected by the unique standards-based Trusted Platform Module (TPM) hardware security chip. This new level of security supports the advanced functionality of the Smart ID, which can hold users’ personal credentials, such as private encryption keys, passwords, digital certificates and biometrics, inside the protected environment of the internal file system.

Using Wave’s Trusted Computing Group-Enabled Cryptographic Service Provider (CSP) , Deepnet can deploy its Smart ID virtual smart card application with hardware-generated and stored cryptographic keys. Traditionally, these keys are vulnerable to attack; one solution is to store the keys in a Trusted Platform Module vault.

"This agreement allows us to offer a higher level of security to enterprise customers," said Yurong Lin, CEO of Deepnet Security. "We are very pleased to have signed the agreement that will benefit our customers. We value the TPM technology Wave Systems has developed and see it as a good complement to our virtual Smart Card."

The TPM chip, embedded directly on the motherboard of new business PCs, performs a variety of business security features when combined with Wave Systems’ EMBASSY™ Trust Suite software — such as, security policy management, data protection, password management and strong pre-boot authentication. The solution can substantially improve protection against password, data and personal information theft, and is designed to provide enhanced application security, strong wireless authentication, secure email and more — all while increasing productivity.

"TPM technology has not only shipped in tens of millions of PC platforms, but it’s also beginning to saturate additional markets as trusted computing dramatically improves the security of technologies such as virtual smart cards," says Steven Sprague, president and CEO of Wave Systems. "By collaborating with the innovators at Deepnet Security, we are enabling Smart ID to leverage the security features of the Trusted Platform Module, which is backed by an industry standards body of over 150 technology vendors collaborating to mitigate the risks of unauthorized user access or hacking theft. We believe that this collaboration significantly raises the bar on security for mobile device tokens."

Under the agreement, Wave is to receive a per-unit royalty based on Deepnet’s distribution of products equipped with Wave’s technology. The agreement does not provide for minimum royalties or distribution volumes.

Trusted Computing Solutions for the Enterprise

In addition to the EMBASSY Trust Suite, Wave also offers four enterprise solutions which deliver improved trusted computing features for government and enterprise markets. Wave’s EMBASSY® Key Management Server (EKMS) and EMBASSY® Authentication Server (EAS) provide trusted computing solutions for network policy management, data protection and strong authentication using biometrics, smart cards and TPMs.

Wave’s EMBASSY® Network Access Control (ENAC) leverages existing network infrastructure and open industry standards for IT control over PC client access to the network, designed to lock down the network from unauthorized access to thwart many common and damaging network attacks. EMBASSY® Endpoint Enforcer (EEE) is Wave’s open, standards-based network security solution designed to work with any network access control solution. It is also designed to capture, report and validate platform integrity metrics on PCs equipped with TPM security chips and to enable third-party applications and services to make informed network access decisions.

For more information on Wave’s TCG-enabled Cryptographic Service Provider, please visit http://www.wave.com/products/csp.html .

About Deepnet Technologies Ltd

Deepnet Technologies provide enterprises, financial institutions and ecommerce websites with the most reliable, strong, two-way and two-factor authentication available that is also easy to deploy, simple to use and cost-effective. Deepnet Unified Authentication platform provides, and seamlessly manages, as many as 8 unique authentication methods and user credentials, covering one-time passwords, smart tokens, virtual smart cards and behavioral biometrics, on one single platform. Deepnet Unified Authentication provides a single identity management platform for all types of applications: Internet services, remote access and enterprise networks. For additional information please visit www.deepnetsecurity.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.

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For more information please contact:

Company:
Wave Systems Corp.
Michael Wheeler
413-243-7026
mwheeler@wave.com
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Schwartz Communications
Michael Schultz / Tiffany Archambault
781-684-0770
wave@schwartz-pr.com
Wave Investor Relations Contact
David Collins, Ratula Roy
Catalyst Global LLC
212-924-9800
wavx@catalyst-ir.com