New line of "ultra-thin" Win Terminals and third generation netOS operating system to be introduced under the Neoware brand.

KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--July 1, 1997--

Neoware netOS Available in Versions for Win Terminals,

Enterprises and Intranets

HDS Network Systems, (NASDAQ: HDSX), which intends to change its name to Neoware Systems Inc. (Editors: see separate press release) today introduced the next generation of its Network Computer technology under the new Neoware brand, including the company's first "ultra-thin" client desktop and the third generation of its NC operating system.

The company's operating system, netOS(TM) 3.0, now enables a complete range of thin clients from Windows terminals to fully-loaded Java NCs.

The company today launched a brand new "ultra-thin" client called NeoStation(TM) housed in a sleek, vertically oriented small footprint case that takes up less than 15 square inches of desktop space.

NeoStation ships with a new version of the company's netOS operating system, called netOS for Win Terminals, to be sold under the Neoware brand. This new "ultra-thin" operating system, which includes Microsoft-endorsed technology, allows NeoStation to connect with multi-user Windows NT computers across a network to run Windows 3.1, 95 and NT applications. Because the applications run on a central server, and not on the desktop, NeoStation is much simpler to use and administer than today's personal computers, yet it offers equivalent performance to today's fastest PCs. Unique among "ultra-thin" clients, NeoStation is also upgradeable to run enterprise, Internet and Java applications with a simple series of software plug-ins.

Along with NeoStation, the company today introduced three new versions of the Neoware netOS operating system for thin clients, with each version tailored to the different computing environments:

-- Neoware netOS for Win Terminals -- designed as an "ultra-thin" operating system for accessing Windows applications on a multi-user NT server across a local area network or the Internet. This version of netOS boots directly into a full-screen Windows session running on an NTRIGUE or WinFrame multi-user NT server. All applications run on the NT server, resulting in the simplest possible desktop. Connection between the desktop and the NT server is made via the ICA protocol, which has been endorsed by Microsoft as a solution to allow non-Windows based thin clients to access Windows applications. Neoware netOS for Win Terminals can be upgraded to other netOS versions with a simple plug-in.

-- Neoware netOS for the Enterprise -- designed for enterprise networks with midrange or mainframe systems, Windows or UNIX(TM) client-server systems which are not yet using Internet technologies. Features available with Neoware netOS for the Enterprise include: 32 available terminal emulators (including 3270, 5250, DEC, Data General, Wyse, Tandem and others), the X protocol for connection to UNIX systems, and ICA for connection to NTRIGUE or WinFrame multi-user NT servers. Neoware netOS for the Enterprise can be upgraded to include Internet technologies with a simple plug-in.

-- Neoware netOS for Intranets -- the most fully-featured version, netOS for Intranets is designed for networks with midrange or mainframe systems, Windows or UNIX client-server systems, the Internet, intranets and extranets. Neoware netOS for Intranets includes all the features of netOS for Enterprises plus Java(TM), the Navigator and Spyglass browsers, e-mail, and a news reader, which the company believes makes netOS for Intranets the most fully featured Network Computer OS available.

Neoware netOS includes Microsoft's CIFS (Common Internet File System), also known as SMB (Server Message Block), allowing thin clients to operate as true peers on Windows networks using standard Microsoft file sharing protocols. Additionally, netOS allows users to use floppy disk drives as their "A:" drive, run multimedia Windows programs to hear audio and display live video at the desktop, and print to local printers connected to the NC's serial and parallel ports.

The third generation of netOS includes numerous other additions and refinements over previous versions, including an improved user interface, a new "browse" feature to make it quicker and easier to connect with computers on a network, a simplified control panel to configure settings on the NC, new configuration options and more.

"With the new Neoware brand, our company will continue to offer the best Network Computer technologies, both in the netOS operating system, and in our Network Computers," said Michael Kantrowitz, the company's executive vice president. "With our new netOS offerings and with NeoStation, we're providing the most complete range of thin client choices. Neoware-branded products now range from the ultimate 'ultra-thin' client, which makes the desktop device as simple to manage as an appliance, to netOS for Intranets, the most robust Network Computer OS available today."

NeoStation, while low-cost, offers the capability and performance of today's most robust personal computers, along with a much smaller footprint, greater simplicity and significantly improved ease-of-use. NeoStation pricing starts at only $649, including keyboard and mouse. Designed as an "ultra-thin" client with all applications running on a central NT server, NeoStation also offers the flexibility of a simple plug-in upgrade that provides integrated Internet access with the Navigator browser, a Java Virtual Machine, UNIX, and enterprise system access -- all packaged in a sleek, small-footprint, vertical chassis measuring a mere 2.1" wide and 7" deep.

NeoStation complements the existing @workStation line of Network Computers, with a new, smaller package and "ultra-thin" design, with all applications running on a central server. The @workStation, introduced in June 1996, was the industry's first true Network Computer, with Java, the Navigator and Spyglass browsers, email, and NC Reference Profile compliance. The @workStation and NeoStation NCs are designed for business environments as easy-to-install and easy-to-administer alternatives to the personal computer. According to the Gartner Group, Network Computers like the NeoStation and workStation can save up to 39% of the cost of ownership of a PC, or approximately $17,000 over five years. Using these numbers, a company with as few as 100 desktops can save $1.7 million by deploying NCs instead of PCs.

The company's products were the first in the NC industry to include key technologies such as the ICA protocol, Java Virtual Machine, the Navigator and Spyglass web browsers, e-mail capability, Windows CIFS file system, videoconferencing, and comprehensive terminal emulation software. All these were added quickly and easily because of the standards-based, open design of the netOS(TM) operating system. The netOS operating system is offered under license to OEMs for quick and easy deployment of application-specific Network Computers for a variety of markets.

About HDS Network Systems Inc.

HDS Network Systems Inc. of King of Prussia, is a leading international supplier of Network Computers and related software, which are cost-effective solutions for the integration and delivery of information and applications to the desktop. Effective August 1, subject to shareholder approval, the Neoware brand and logo will replace the HDS Network Systems brand name and logo, and the company's stock exchange symbol will change to NWRE. The company's web site is already available at http://www.neoware.com . HDS Network Systems has assigned all rights and title to the name "HDS" to Hitachi Data Systems, including the hds.com World Wide Web domain name, as part of a number of agreements under which Hitachi Data Systems has licensed the company's netOS operating system and will purchase Network Computers for resale to its customers. The company's netOS operating system is based on an open architecture, incorporating industry standards to enable seamless access to multiple forms of information, including text, graphics, audio, and video, on any type of network. (Telephone: [phone]; fax: [phone]; Web site: http://www.neoware.com . Email: [e-mail].) -0- Neoware, @workStation, NeoStation and netOS are trademarks of HDS Network Systems Inc. HDS is a trademark of Hitachi Data Systems Inc. Java and other Java-based names are trademarks of Sun Microsystems Inc. and refer to Sun's Java technologies. Netscape Navigator is a trademark of Netscape Communications Corp. Windows is a registered trademark of Microsoft Corp. ICA is a registered trademark of Citrix Systems Inc. All other brand names mentioned are trademarks or registered trademarks of their respective holders.

The statements in this press release relating to matters that are not historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause actual results to differ materially from those anticipated, including but not limited to, customer acceptance of HDS Network Systems' line of Network Computers and the newly introduced options, pricing pressures, rapid technological changes in the industry and increased competition. These risks and uncertainties are described in reports and other documents filed by HDS Network Systems with the Securities and Exchange Commission.

CONTACT: HDS Network Systems Inc.

Lou Anzalone, 610/277-8300, ext. 114

[e-mail]

or

Manning, Selvage & Lee

Scott Friedman, 212/213-7172

[e-mail]