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Wave Q4 and Full-Year 2006 Revenues Rise 149% and 206% to $866,000 and $3.1 Million, Respectively, on Continued Strength in OEM Software Royalties

Lee, MA — March 14, 2007 — Wave Systems Corp. (NASDAQ: WAVX — today reported results for the fourth quarter (Q4) and year ended December 31, 2006 and reviewed recent corporate progress and developments.

Principally reflecting a 155% increase in license revenues in Q4 2006 versus last year, Wave’s Q4 2006 net revenues rose to $866,000, compared to Q4 2005 net revenues of $348,000 and Q3 2006 net revenues of $846,000. The improvement in license revenues was principally due to royalties earned from increased shipments of Wave software by Wave’s OEM partners. Wave’s services revenues in Q4 2006 were $12,000 versus services revenue of $13,000 in the year ago period.  

For Q4 2006 Wave reported a net loss of $4.8 million, or $0.12 per basic share, including non-cash, share-based compensation expense of $414,268, or $0.01 per basic share, recorded in accordance with the implementation of SFAS 123(R) for “Share-based Payment,” effective January 1, 2006. Wave’s Q4 2005 net loss of $4.5 million, or $0.15 per basic share, did not include any share-based compensation expense. Per share figures are based on a weighted average number of basic shares outstanding in the fourth quarters of 2006 and 2005 of 41,054,796 and 29,711,000, respectively. Wave’s shares outstanding and loss per share figures for the fourth quarter and full year periods in 2006 and 2005 have been adjusted to reflect the Company’s 1-for-3 reverse stock split that went into effect on July 26, 2006.

For the full year 2006, Wave’s net revenues rose by 206% to $3.1 million, compared to net revenues of $1.0 million in the prior year. For 2006 Wave reported a net loss of $18.8 million, or $0.51 per basic share, including non-cash, share-based compensation expense of $1,556,043, or $0.04 per basic share. Wave’s net loss of $17.6 million, or $0.63 per basic share, in 2005 did not include any share based compensation expense. The weighted average number of basic shares outstanding in 2006 and 2005 were 36,735,059 and 27,726,221, respectively.

Balance Sheet Snapshot & Auditor’s Opinion Letter Disclosure

As of December 31, 2006 Wave had total current assets of $8.8 million, working capital of approximately $5.4 million and no long-term debt. Pursuant to Rule 4350 of the NASD Marketplace Rules, Wave is announcing, as it has done the past two years at this time, that its auditors’ opinion letter which will be contained in Wave’s Form-10-K for the year ended December 31, 2006 raises “substantial doubt” about Wave’s ability to continue as a going concern given its recurring losses from operations, working capital position and its accumulated deficit.

Steven Sprague, Wave’s president and CEO, commented, “Though the formation of a global market for trusted computing solutions remains in the early stages, during 2006 Wave continued to expand its market position, base of industry relationships and the breadth of its product offerings, including both PC and server applications. Importantly, this progress was reflected in increased revenues as key PC OEM partners commenced their bundled shipments of Wave’s EMBASSY Trust Suite software. While there have been normal delays and challenges as the market becomes better educated and the decision making on deployment strategy proceeds, trusted computing deployment has continued to expand. Industry analysts estimate that the total installed base of PCs with enabling TPM security chip technology exceeds 50 million deployed units, and we believe that the rate of TPM deployment of this technology will accelerate through 2007.

“Our key distribution relationships remain with partners Dell, Intel and Gateway. In addition, Seagate has announced plans to launch an innovative full disc encryption (FDE) drive. The FDE technology, when combined with the benefits of a TPM and Wave’s software, can deliver a powerful and compelling security solution for data at rest. We believe that the launch of the FDE will help to drive adoption of trusted computing technology. Today we also announced the completion of a licensing agreement with Seagate to allow our software to be bundled with their FDE drives.  

“In summary, we are pleased with our achievements during 2006 and the progress in the deployment of our technology through our industry partner relationships. We are also encouraged by the growing interest in our products expressed by enterprises and government agencies. While we cannot predict or guarantee the timing or magnitude of their possible adoption plans, we believe that the level of interest and resource commitment being put forth to evaluate and test trusted computing solutions, combined with the growing penetration of TPM-enabled computers worldwide, suggests that a substantial market opportunity for our products is developing. We believe that our early spade work will continue to benefit us as the market develops.”

Summary of recent progress/developments:

(for more details, please visit

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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:

Wave Contact:
Gerard T. Feeney, CFO
Wave Systems Corp.
Wave Investor Relations Contact
David Collins, Ratula Roy
Catalyst Global LLC

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