M-Systems Celebrates Five Years of DiskOnKey(R) USB Flash Drives with the Introduction of a New Whopping 8 Gigabyte Density.

LAS VEGAS -- With 1000X the Density of Its First 8 Megabyte DiskOnKey and Support for a Broad Portfolio of Software Applications, M-Systems Continues to Lead and Innovate Smart Personal Storage

M-Systems (Nasdaq: FLSH), an industry leader and innovator of flash-based data storage devices, is announcing the availability of an 8 gigabyte DiskOnKey USB flash drive (UFD), celebrating five years of personal, portable and pocketable USB storage with 1000X the density of its original 8 megabytes DiskOnKey first launched in 2000.

In line with market demand, NAND flash price trends and thanks to its strategic flash supply agreements with leading flash manufacturers, M-Systems will first offer the 8 gigabyte DiskOnKey through its long time partner Kingston Technology Company Inc. The 8 gigabyte UFD combines high density, robust security and reliability, satisfying the needs of even the most memory-hungry professionals. Whether used as a tool by IT managers, for storing, backing-up or archiving countless files, or in serving graphic designers, architects and video editors to store, carry and manipulate high resolution photos, CAD files or roughly two DVDs' worth of video files, the 8 gigabyte DiskOnKey is a storage giant in a miniature, ultra-portable package.

Today's data portability requirements constantly push the storage density envelope, which in turn, further elaborates the need for application and environment portability. U3 LLC, launched by M-Systems and SanDisk exactly one year to date is entrusted with the task of realizing application portability, building on a smart, portable platform and a rapidly growing community of 3rd party software developers which supports it. The U3 platform transforms USB flash drives from simple storage devices into U3 smart drives making software applications, personal preferences, passwords, settings and files more portable, personal, and protected than ever before. (For more information on U3, please go to www.u3.com).

"We are extremely pleased to have reached this fantastic milestone of 1000X the megabyte density of the first ever DiskOnKey USB flash drive, introduced back in 2000", said Dov Moran, creator of the USB flash drive and president and CEO of M-Systems. "Innovation is genuinely a way of life in M-Systems. We continually strive to come up with new ways of making personal storage smarter, better and more exciting. No doubt, the past 5 years have been nothing short of amazing, but we now believe we are at the onset of a second wave, a new paradigm shift in USB personal storage. With flash pricing and technology advancements expected to lead towards 128 gigabytes drives by 2010 - we certainly have our work cut out for us where innovation is concerned. What are the potential usage models when dealing with a 32 gigabytes U3 smart drive? What new and exciting opportunities await end-users when they have 64 gigabytes of highly reliable, secure and immediate personal storage device in their pockets? We feel U3 is an excellent, promising step in the right direction and we believe it will flourish and proliferate in the coming years as increased densities call for precisely those functionalities which U3 smart drives are being designed to deliver and vice versa. Stick around - M-Systems will strive to make the next five years at least as interesting as the last five."

DiskOnKey Recent Recognition

M-Systems' DiskOnKey product was recently named as one of the top 10 gadgets on PC World's list of "The 50 Greatest Gadgets of the Past 50 Years" released December 24th, 2005. For a complete version of the PC World article, please go to: http://www.pcworld.com/resource/printable/article/0,aid,123950,00.asp

Note to Editors:

M-Systems holds a table at Digital Experience 2006. For a briefing on M-Systems' achievements in the past five years and a glimpse into its vision for the next five, please refer to Mr. Daniel Schreiber, VP Marketing DiskOnKey.

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) products 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.

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.