M-Systems' uDiskOnChip Offers Embedded Market a USB 2.0 Storage and Boot Solution for Microsoft Windows XP Embedded.

SAN FRANCISCO -- M-Systems is Showcasing This Highly Regarded Flash Storage Solution during a Press Conference Today at 3PM, Moscone Convention Center

M-Systems (Nasdaq:FLSH) today announced that its uDiskOnChip(R) USB 2.0 flash disk can now be used as a boot solution for embedded products running the Microsoft Windows XP Embedded operating system.

Demonstrations of uDiskOnChip booting Windows XP Embedded twice as fast as compact flash(a) will take place at the company's booth #2525 and Microsoft's booth #1602, as well as during a special press conference today at 3 PM in the North Hall, room 122.

"We introduced uDiskOnChip as the industry's first highly-reliable, high-capacity, high-performance USB 2.0 device to support the unique demands of single board computers, thin clients, gaming, point of sale terminals and other embedded systems," said Amir Tirosh, general manager of M-Systems' embedded division. "We're now pleased to announce another ground-breaking achievement. uDiskOnChip not only boots the Microsoft Windows XP Embedded image, but does it quickly and securely."

"M-Systems' uDiskOnChip USB 2.0 flash disk boot solution is an example of the innovative and flexible solutions that bring added value to our Windows XP Embedded customers," said Jane Gilson, director for the Mobile and Embedded Devices Division at Microsoft Corp. "Microsoft works closely with companies such as M-Systems to bring the best user experience to our embedded customers."

"Until recently, the embedded systems market was unable to take advantage of the inherent benefits of USB 2.0 flash storage," said Sean Liming, managing director of SJJ Embedded Micro Solutions and the author of Windows XP Embedded Advanced and Windows XP Embedded Supplemental Toolkit. "Today, M-Systems, in addition to introducing USB 2.0 storage to embedded products, is showing the world's first and only USB 2.0 boot solution for Microsoft Windows XP Embedded."

uDiskOnChip Features and Benefits

uDiskOnChip draws on the best of M-Systems' flash expertise and innovative technology to deliver the following added value benefit in a single device:

--High Performance: M-Systems Fly-By(TM) acceleration algorithms maximize the capabilities of the USB 2.0 high-speed interface. This optimization enables read rates as high as 20 MB/sec, resulting in the fasted OS boot and application loading rates. Write rates reach 10 MB/sec, enabling faster file caching.

--High Data Reliability: Data reliability and extended lifespan are achieved using M-Systems' industry-standard TrueFFS(R) flash-management algorithms, which are built into uDiskOnChip's firmware.

--Strong Security and Encryption: Built-in security and cryptography are implemented in hardware using M-Systems' SuperMAP(R) secure-chip expertise, enabling a variety of security-related applications for system designer.

(a) Environment: 300MB XPe SP2 image with Winlogon, Explorer Shell, FAT16, no EWF. H/W: Lippert Thunderbird, Pentium-M 1.6GHz

About M-Systems

M-Systems designs, develops and markets innovative flash data storage solutions for digital consumer electronics markets and embedded systems. M-Systems primarily targets two fast-growing digital consumer electronics markets: the USB (universal serial bus) flash drive market with its DiskOnKey(R) product and the multimedia mobile handset market with its Mobile DiskOnChip(R) products. For more information, please contact M-Systems 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.

All company and product names mentioned may be trademarks or registered trademarks of their respective holders and are used for identification purposes only.

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.