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Wave Q2 2007 Revenues Rise to a Record $1.4 Million On Continued Strength in PC OEM Software Royalties

Lee, MA — August 8, 2007 — Wave Systems Corp. (NASDAQ: WAVX — www.wave.com) ) today reported results for the first quarter (Q2) of 2007 and reviewed recent corporate progress and developments.

Principally reflecting an increase in license revenues in Q2 2007 versus last year, Wave’s Q2 2007 net revenues rose to $1,410,000, compared to Q2 2006 net revenues of $910,000. The improvement in license revenues, which was principally due to increased royalties from shipments of Wave software by Wave’s leading OEM partner, more than offset over $200,000 in services revenues recorded from a government contract in the year-ago quarter. Gross profit for Q2 2007 rose to $1,228,000 compared to $555,000 in Q2 2006.

For Q2 2007 Wave reported a net loss of $4,841,000, or $0.11 per basic and diluted share, compared to a Q2 2006 net loss of $4,539,000, or $0.13 per basic and diluted share. Per-share figures are based on a weighted average number of basic shares outstanding in the second quarters of 2007 and 2006 of 44,931,000 and 35,416,000, respectively. Wave’s shares outstanding and loss per share figures for the second quarter in 2006 have been adjusted to reflect the Company’s 1-for-3 reverse stock split that went into effect on July 26, 2006.

As of June 30, 2007, Wave had cash and equivalents of $12.5 million and no long-term debt.

Steven Sprague, Wave’s president and CEO, commented, "Wave continued to achieve revenue growth in the second quarter principally as a result of contributions from the bundling of our EMBASSY® Trust Suite (ETS) software with shipments of our OEM partners. 

"Importantly, in late July our leading PC OEM commenced shipments of our ETS with EMBASSY Trusted Drive Manager security software bundled with certain notebook PCs configured with Seagate’s Momentus 5400 (Full Disc Encryption) FDE.2 hard drives. Supporting FDE drive shipments represents an important new market opportunity for Wave. Enterprise sales of Wave’s FDE software bundle have already closed so far in Q3 2007. In the third quarter we have also achieved the first sales of our EMBASSY Remote Administration Server (ERAS), which provides enterprises with central management and auditing of their data protection solutions. We believe the ERAS server is an important component that can be used to demonstrate that the data on a lost or stolen laptop was securely encrypted.

"With more than four million copies of our bundled software delivered to customers this last quarter, Wave continued to be one of the leading suppliers of the infrastructure and tools to manage and deploy Trusted Platform Module (TPM) security chips. Wave is continuing to invest in our products and services that enable the enterprise to take advantage of the embedded security they are buying with PCs that ship with TPMs. We believe strong authentication, strong data protection and network access control represent the important applications that allow enterprises to leverage the capabilities of the TPM. In each application we have teamed with major partners to pursue the opportunity to deliver very attractive, cost effective and easy-to-deploy solutions.

"In the last quarter, we achieved significant progress in the data protection and Network Access Control markets and continued the evolution of our solutions. We believe the steady growth in trusted computing features and functionality, the growing global installed base of PCs with TPM chips and growing industry awareness and appreciation of the value trusted computing can provide, could all serve to support our effort to initialize enterprise sales in the coming quarters."

Summary of recent progress/developments:
(for more details, please visit http://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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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, Ratula Roy
Catalyst Global LLC
212-924-9800
wavx@catalyst-ir.com




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