Toshiba and M-Systems Introduce New Generation of DiskOnChip(R) Embedded Flash Drives for Mobile Handsets and Consumer Electronics.

TOKYO and KFAR SABA, Israel -- DOC H3, with built-in TrueFFS(R) flash management technology, simplifies design utilizing the latest multi-level cell NAND flash 

M-Systems (Nasdaq: FLSH) and Toshiba Corporation (OTC: TOSBF) (JP:6502) today announced that the companies will offer DiskOnChip (DOC) H3, a new generation of on-board, high density embedded flash drives (EFD) based on DiskOnChip architecture, for mobile handsets and consumer electronics devices. DOC H3 will allow device designers to easily integrate cost-effective, high-density, on-board storage utilizing Toshiba's latest multi-level cell (MLC) NAND flash, and M-Systems' built-in TrueFFS(R) flash management software in firmware.

DOC H3 utilizes 70nm generation MLC NAND flash. By changing the product configuration from a monolithic design to a multi-chip design, Toshiba and M-Systems gain access to the latest advances in NAND flash technology and shorten DOC development time.

Designed with an improved architecture that virtually eliminates the need for integration via software solutions, DOC H3 manages its NAND flash media from within its controller integrated circuit (IC), allowing customers to reduce product development cycles.

"We are very proud to work closely with Toshiba, the world leader of MLC NAND flash," said Dov Moran, president and CEO of M-Systems. "By embedding our TrueFFS flash management technology into the DOC H3 itself, it becomes extremely easy to integrate this reliable and cost-effective EFD into next generation designs."

"Toshiba and M-Systems' many years of partnership and commitment to DiskOnChip architecture have now yielded a new generation NAND flash-based storage solution, the DOC H3. Our focus is to continue delivering the most technologically advanced, cost-effective NAND flash based solutions in order to satisfy the expanding market needs for high density flash memory," said Kiyoshi Kobayashi, Technology Executive, Flash Memory, Toshiba Corporation Semiconductor Company. "Enabling both code and data storage in a single package, DOC H3 is the efficient way for system designers to tap into our leading flash memory technology in an on-board storage form."

Availability

DOC H3 will be made available in a variety of densities ranging from 2-gigabit (256-megabyte) to 16-gigabit (2-gigabyte). First engineering samples of DOC H3 are expected to be available in the second quarter of 2006, with mass production slated for the third quarter of 2006.

About Toshiba Corporation

Toshiba Corporation is a leader in the development and manufacture of electronic devices and components, information and communication systems, digital consumer products and power systems. The company's ability to integrate wide-ranging capabilities, from hardware to software and services, assure its position as an innovator in diverse fields and many businesses. In semiconductors, Toshiba continues to promote its leadership in the fast growing system LSI market and to build on its world-class position in NAND flash memories, analog devices and discrete devices. Visit Toshiba's website at www.toshiba.co.jp/index.htm.

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.