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Wave Q2 2008 Revenues Rise 41% to a Record $2.0 Million on Continued Growth in Software License Sales

Lee, MA — August 11, 2008 — Wave Systems Corp. (NASDAQ: WAVX — www.wave.com) today reported results for the second quarter (Q2) and six months ended June 30, 2008 and reviewed recent corporate progress and developments.

Reflecting an increase in license revenues, Wave’s Q2 2008 net revenues rose 41% to $1,985,000, compared to Q2 2007 net revenues of $1,410,000, and Q1 2008 net revenues of $1,699,000. The improvement in license revenues was principally due to increased royalties from shipments of Wave software by OEM partners as well as from initial growth in software license upgrades.

Given that Wave is in the early stages of its software upgrade and maintenance business and consistent with the Company’s revenue recognition policies, Wave has not yet established "vendor-specific objective evidence of the fair value of each undelivered element" for its software and services. Accordingly, Wave’s upgrade sales are being recorded as deferred revenue and then recognized generally over a 365-day period. Reflecting this revenue recognition practice and growth in the company’s upgrade license sales activity, deferred revenue rose $233,000 to $589,000 in Q2 2008 compared to deferred revenue of $356,000 in Q1 2008. Gross profit for Q2 2008 rose to $1,746,000 (87.9%) compared to $1,228,000 (87.1%) in Q2 2007.

For Q2 2008, Wave reported a net loss of $5,640,000, or $0.10 per basic and diluted share, compared to a Q2 2007 net loss of $4,841,000, or $0.11 per basic and diluted share. Per-share figures are based on a weighted average number of basic shares outstanding in the second quarters of 2008 and 2007 of 53,950,000 and 44,931,000, respectively. As of June 30, 2008, Wave had cash and cash equivalents of $146,000 and no long-term debt. Subsequent to the close of Q2 2008, Wave completed a $1.6 million shelf financing transaction in early July and announced today an additional $821,000 shelf financing transaction to be completed this week.

Steven Sprague, Wave’s President and CEO, commented, "During Q2 2008 we continued to execute on our core security business, making further progress with initial software upgrade sales, principally smaller orders to enterprises piloting our technology, as well as the continued expansion of our installed base of Wave EMBASSY Trust Suite via our PC OEM Bundling programs. We also saw significant progress from both Wavexpress, with their NBC contract for online Olympics coverage utilizing their TVTonic service, and from eSign as they continued to make strides in expanding their customer base in the mortgage industry for their digital signature solutions.

"Our customer base for potential software upgrades continued to expand during the second quarter. We view these pilots and early adopters, as well as the growing installed base of bundled software which grew to 33.8 million units as of June 30, 2008, as our primary opportunity for future upgrade sales.

"Importantly, during the quarter we delivered updated software for the new Dell platforms which we believe will commence shipping later this month. As we have previously disclosed, Wave will be entitled to a higher per-unit royalty on this version of our software, reflecting the additional value we have engineered into this new software release. We plan to continue to pursue new OEM relationships in the coming quarters. Supporting our sales and marketing efforts is costly, but we believe that market opportunity is sufficient to warrant our efforts in this area.

"While enterprise customer behavior is difficult to predict, we are currently working to continue our revenue growth in Q3 versus Q2, and are working very hard to convert our expanding base of pilot customers into larger-scale deployments. We remain optimistic about the positive responses we are getting from our customer interactions."

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