M-Systems' DiskOnChip(R) Enables High Capacity Embedded Flash Drive Functionality for Microsoft Windows Mobile 5.0.

SUNNYVALE, Calif. -- Currently Integrated within More Than 50 Percent of Windows Mobile-based Smartphones, DiskOnChip Poised to Deliver Additional Features within This Growing Market Segment

M-Systems (Nasdaq:FLSH) today announced the availability of software support for its DiskOnChip product line for Windows Mobile 5.0. Support includes a block device driver that emulates the functionality of a hard drive, enhanced boot support including support for the Windows Mobile "paging-on-demand" feature specially tailored for boot from NAND-based devices, and a wide range of tools for development and mass production.

Also supported is the Windows Mobile 5.0 persistent storage feature, which allows all user data to be saved directly onto the DiskOnChip embedded flash drive instead of within SDRAM, reducing associated costs, ensuring all user data virtually forever, and improving battery life.

DiskOnChip, a multi-level cell (MLC) NAND-based embedded flash drive (EFD) with capacities ranging up to one gigabyte, is ideally suited for multimedia applications such as mega pixel photography, music playback and video download or record. Utilized by six of the top seven mobile handset manufacturers and integrated within more than 50 percent of Windows Mobile-based smartphones, DiskOnChip is a proven and mature non-volatile storage solution that helps to reduce time to market for handset vendors.

"A growth engine of the global handset industry is converged devices (smartphones and wireless PDAs). From 5 million units sold globally in 2001, we forecast compound annual growth of more than 30 percent to 100 million units by the end of 2007," said Chris Ambrosio, director of the Wireless Device Strategies Service for Strategy Analytics. "Microsoft Windows Mobile-based devices are becoming one of the preferred mobility solutions for IT managers in large corporations, as well as for individual business users. We estimate over 4 million Microsoft Windows Mobile-based converged devices were sold globally in 2004, and project this figure will grow to over 23 million units by the end of 2007."

"With improved functionality, new applications, a more flexible design and better support for mass storage, we expect Windows Mobile 5.0 to further strengthen the momentum of Microsoft in the mobile market," said Ariel Moshkovitz, vice president of marketing for M-Systems' mobile division. "DiskOnChip and its TrueFFS flash management software provide developers of Windows Mobile-based devices with immediate access to the most cost-effective, reliable, and feature-rich embedded flash drive in the smartphone industry."

"M-Systems has a history of providing fast and reliable support for past Windows Mobile software platforms, and we're excited they've chosen to extend their support to Windows Mobile 5.0," said Jonas Hasselberg, group product manager, Mobile and Embedded Devices Division at Microsoft Corp. "DiskOnChip enables our customers to take advantage of the flexibility and power of the new Windows Mobile 5.0 software platform and protect their data against power loss, reduction of memory costs and improve battery life."

About M-Systems

M-Systems develops, manufactures and markets innovative flash-based data storage solutions for consumer electronics and embedded markets. The Company targets the fast growing multimedia mobile handset market with its DiskOnChip(R) and MegaSIM(TM) solutions and the popular USB flash drive market with its DiskOnKey(R) product. More information about M-Systems is available online at www.m-systems.com.

Note to Editors: High-resolution photo images of M-Systems' products can be found on the Internet at www.m-systems.com/content/Corporate/Press/Photos.asp.

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This press release includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements, as they are subject to various risks and uncertainties which may cause actual results to vary significantly. These risks include, but are not limited to: the effect of global economic conditions in general and conditions in M-Systems' industry and target markets in particular, shifts in supply and demand, market acceptance, the impact of competitive products and pricing, product development, commercialization and technological difficulties, and capacity and supply constraints including dependence on flash component suppliers; changes in M-Systems' and its customers' inventory levels and inventory valuations; timely product and technology development/upgrades and the ability to manage changes in market conditions as needed; market acceptance of new products and continuing product demand; the impact of competitive products and pricing on M-Systems' and its customers' products and markets; the development, release and sale of new products by strategic suppliers and customers; the development and growth of anticipated markets for M-Systems' and its customers' products; and other risk factors detailed from time to time in M-Systems' filings with the Securities and Exchange Commission. M-Systems assumes no obligation to update the information in this press release and disclaims any obligation to publicly update or revise any such forward-looking statements to reflect any change in its expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements. Reference to M-Systems' website above does not constitute incorporation of any of the information thereon into this press release.