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Wave Achieves Record Net Revenues of $1.9 million
and $6.3 Million for Q4 and Full-Year 2007, Respectively

Growth Driven Principally by PC OEM Royalties, Complemented by Client and Server Upgrades

Lee, MA — March 13, 2008 — Wave Systems Corp. (NASDAQ: WAVX — a leading developer of trusted computing solutions and services, today reported record net revenues for the fourth quarter (Q4) and year ended December 31, 2007 and reviewed recent corporate progress and developments. For the full year 2007, over 18 million copies of Wave’s EMBASSY Trust Suite (ETS) software were shipped by PC OEM partners. To date, a total of over 22 million ETS copies have shipped since the product’s inception.

Principally reflecting a 119% increase in software license revenues in Q4 2007 versus Q4 2006, Wave’s Q4 2007 net revenues rose 116% to a record $1,875,000, compared to Q4 2006 net revenues of $866,000. The higher level of license revenues was principally due to royalties earned from a significant increase in the number of bundled shipments of Wave software by OEM partners. Gross profit rose to $1,643,000 in Q4 2007, or a gross profit margin of 88%, compared to gross profit of $656,000 in Q4 2006, or a gross profit margin of 76%, principally reflecting higher sales volumes on fully amortized software costs, offset somewhat by higher customer support costs.

Reflecting higher levels of SG&A and research expense related to headcount additions and higher salary and expense, Wave reported a Q4 2007 net loss of $5.3 million, or $0.11 per basic share, compared to a Q4 2006 net loss of $4.8 million, or $0.12 per basic share. Per share figures are based on a weighted average number of basic shares outstanding in the fourth quarters of 2007 and 2006 of 49,699,460 and 41,054,796 respectively.

For the full year 2007, Wave’s net revenues rose by 102% to a record $6.3 million, compared to net revenues of $3.1 million in 2006. Wave’s SG&A expense rose 21% in 2007 reflecting a range of costs related to higher levels of sales, marketing, business development, corporate communications and customer support activities.  R&D expenses increased by 24% to accommodate salary increases and new hires related to Wave’s expanding product development activities.

As a result of higher overhead levels, which more than offset the year-over-year increase in revenue, Wave reported a net loss in 2007 of $20.0 million, or $0.43 per basic share, compared to a net loss in 2006 of $18.8 million, or $0.51 per basic share. The weighted average number of basic shares outstanding in 2007 and 2006 were 46,660,794 and 36,735,059, respectively.

Steven Sprague, Wave’s president and CEO, commented, "Wave made substantial progress in 2007 and that momentum continues in 2008, driven in part by growing enterprise interest in Dell’s Seagate Full Disc Encryption (FDE) solution which features our ETS software. This solution, actively marketed by Dell as the ‘The World’s Most Secure Notebook,’ is generating broad interest among enterprises seeking to secure confidential data and applications on mobile PCs, and has led to some initial enterprise upgrades to Wave’s EMBASSY Remote Administration Server. While modest upgrade activity continued in Q4 2007, we are seeing increasing interest from enterprises considering the use of FDE solutions, including several large organizations which have informed us that they have begun or plan to begin FDE pilots.

"In 2008, Wave has completed a number of Embassy Remote Administration Server sales and installations. These range in size from a few units to hundreds of seats in a single installation. As these customers order new PC’s we believe that many will require FDE Drives, TPMs and our software on those platforms. We are actively working with a number of organizations to plan the roll out of our server either in anticipation of their purchasing new PCs with Seagate FDE drives or for integration with existing PC’s. Our customers include enterprises in industries including healthcare, law, financial services, government and manufacturing, located both domestically and abroad.

"We believe that recent, high-profile coverage of the inherent challenges of software-based disc encryption solutions has helped to increase focus on the benefits of hardware-based full disc encryption and related security solutions. In addition, many of our FDE customer prospects are expressing interest in the use of our solutions with their trusted platform modules (TPMs) and are allowing us to demonstrate how Wave solutions can deliver hardware-based security, authentication and network access functions in a cost effective manner by leveraging the TPM security chips already deployed in many of their PCs.

"As we proceed through 2008, we remain focused on working closely with our partners to convert enterprise leads into upgrade customers for our full client/server solutions. This process is providing us with valuable experience and enhancements to our marketing efforts. With the growing availability of trusted computing hardware and the increasing awareness of the unique benefits of TPM security chips and our solutions, we anticipate continued growth in 2008 in both our bundled software sales and our upgrade sales of client and server software, although, the slope of that growth remains difficult to predict."

Balance Sheet Snapshot & Auditor’s Opinion Letter Disclosure

As of December 31, 2007 Wave had total current assets of $6.0 million, including cash equivalents of $3.7 million and no long-term debt. Pursuant to Rule 4350 of the FINRA Marketplace Rules, Wave is announcing, as it has done the past three 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, 2007 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.

Summary of recent progress/developments:
(for more details, please visit

Dell Software License Amendment: In early January, Wave signed an amendment to its software license agreement with Dell extending the term of the agreement to January 2011. Pursuant to the agreement, Dell is permitted to distribute Wave’s ETS software on certain of its PCs that include TPM security chips. Reflecting value-added features incorporated into a new version 3.0 of Wave’s ETS software, starting later in 2008 Wave will receive a higher per-unit royalty based on the volume of products shipped by Dell with this software. The contract does not provide for guaranteed minimum royalties or shipped quantities of units containing Wave software.

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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


Consolidated Balance Sheets


December 31,


December 31,





Current assets:




    Cash and cash equivalents




Accounts Receivable, net of allowance for doubtful accounts of $- 0 – and $40,547 at December 31, 2007 and 2006, respectively




    Prepaid expenses




       Total current assets




    Property and equipment, net




    Other assets




Total Assets




Liabilities and Stockholders’ Equity




Current liabilities:




    Accounts payable and accrued expenses




    Deferred revenue




       Total current liabilities




Stockholders’ Equity:




Common Stock, $.01 par value. Authorized 150,000,000 shares as Class A;  49,744,327 shares issued and outstanding in 2007 and 42,203,773 in 2006




Common Stock, $.01 par value. Authorized 13,000,000 shares as Class B;




     38,232 shares issued and outstanding in 2007 and 39,232 in 2006

Capital in excess of par value




Accumulated deficit




Total Stockholders’ Equity




Total Liabilities and Stockholders’ Equity