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Wave Q1 2007 Revenues Rise to a Record $1.3 Million Reflecting Continued Strength in PC OEM Software Royalties

Lee, MA — May 10, 2007 — Wave Systems Corp. (NASDAQ: WAVX — ) today reported results for the first quarter (Q1) of 2007 and reviewed recent corporate progress and developments.

Principally reflecting an increase in license revenues in Q1 2007 versus last year, Wave’s Q1 2007 net revenues increased to $1,287,000, compared to Q1 2006 net revenues of $493,000 and Q4 2006 net revenues of $866,000. The improvement in license revenues, which was principally due to royalties earned from increased shipments of Wave software by Wave’s leading OEM partner, more than offset a decline in services revenues related to the timing of certain government contracts. Gross profit for Q1 2007 rose to $1.1 million compared to $278,000 in Q1 2006.

For Q1 2007 Wave reported a net loss of $5,046,000, or $0.12 per basic share, compared to a Q1 2006 net loss of $4,992,000, or $0.15 per basic share. Per share figures are based on a weighted average number of basic shares outstanding in the first quarters of 2007 and 2006 of 42,243,000 and 32,564,000, respectively. Wave’s shares outstanding and loss per share figures for the first quarter in 2006 has been adjusted to reflect the Company’s 1-for-3 reverse stock split that went into effect on July 26, 2006.

As of March 31, 2007, Wave had cash and equivalents of $2.5 million and no long-term debt. Deferred revenue increased $186,000 to $590,000 at the close of Q1 2007, compared to $404,000 at year-end 2006.

Steven Sprague, Wave’s president and CEO, commented, "Wave’s Q1 performance continued to reflect accelerated shipments of PCs bundled with our EMBASSY® Trust Suite software and led to a record level of revenue in the first quarter period. In addition to the revenue contribution from this PC OEM activity, Wave also expects to continue to benefit from a growing base of industry-wide TPM deployments as well as expanding market awareness of our brand and position in the trusted computing market.

"We view our participation with Seagate and their Full Disc Encryption (FDE) hard drives as an important new market opportunity — both for bundled client software as well as standalone software sales. We also expect this relationship to increase interest in our server-based management tools. Importantly, the adoption of FDE drives in PC OEM product lines has started to engage across multiple PC vendors.

"We have commenced shipping enterprise pilots of our EMBASSY® Remote Administration Server (ERAS) and Trusted Drive Software for management of Seagate FDE drives and are pleased with the feedback we have received from potential enterprise customers to date. ERAS is designed to control secure devices from a central server, enabling the creation of a unified trust network for broad, no-touch, deployment and management of TPM hardware security chips and FDE drives.

"In conjunction with the growing base of industry-wide TPM shipments, Wave remains focused on continuing our marketing efforts to enterprises and government agencies that are contemplating an upgrade to Wave’s client and server solutions as part of their trusted computing deployment plans. Importantly, while our pipeline of opportunities continue to develop, in most cases we find we are still in the early stages of the process of helping these entities to understand how to implement and leverage trusted computing solutions. To support these sales opportunities, we continue to engage in discussions with enterprise prospects about our products and the feature and cost benefits of trusted computing. We

are also encouraged by unsolicited interest we are continuing to receive about trusted computing and our products as well as the progress of OEM partners and Wave’s own sales force."

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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