M-Systems and Renesas Technology Announce Supply and Strategic Collaboration Agreements; Companies to Collaborate Utilizing Advanced, High-Performance AG-AND Multi-Level Cell Flash Memory and Flash Management and Control Technologies.

SUNNYVALE, Calif. & TOKYO -- M-Systems (Nasdaq: FLSH), an industry leader and innovator of flash-based data storage devices, and Renesas Technology Corp. (Renesas Technology), the world's leading microcontrollers company, today announced that the Companies have entered into supply and strategic collaboration agreements.

Renesas Technology will supply advanced multi-level cell (MLC), high-performance AG-AND flash memory, while M-Systems will contribute its leading flash controllers and TrueFFS(R) flash management technology.

"Inline with our aim to increase 4Gbit AG-AND flash memory production, we looked for a world-class partner to expand this important business," said Masahiro Yamamura, Executive General Manager of Memory Business Group at Renesas Technology Corp. "M-Systems is a leading flash-based storage devices company and has excellent IP and software technology. We are pleased to strengthen the relationship with M-Systems. We believe establishing this collaboration will significantly increase our advanced AG-AND flash memory business."

"M-Systems firmly believes in seeking value through strategic sourcing and technology partnerships with flash memory leaders. The agreements with Renesas Technology are no exception to that rule," said Dov Moran, president and CEO of M-Systems. "Our customers throughout the world stand to benefit because the agreements announced today are likely to contribute to their peace of mind as they expand their sales over the coming years, relying on quality products built with the respective technologies of both Renesas Technology and M-Systems. We are impressed with AG-AND's quality, reliability and performance and are proud to partner with Renesas Technology."

About Renesas Technology Corp.

Renesas Technology Corp. designs and manufactures highly integrated semiconductor system solutions for mobile, automotive and PC/AV markets. Established on April 1, 2003 as a joint venture between Hitachi, Ltd. (TSE : 6501, NYSE : HIT) and Mitsubishi Electric  Corporation (TSE : 6503) and headquartered in Tokyo, Japan, Renesas Technology is one of the largest semiconductor companies in the world and the world's leading microcontroller supplier globally. Besides microcontrollers, Renesas Technology offers flash memories, system-in-package and system-on-chip devices, Smart Card ICs, mixed-signal products, SRAMs and more. www.renesas.com

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.