msystems™ Launches mToken, Providing Smart Card Functionality and Secure Authentication for Online Banking and Other Web-Based Services

Bank Leumi adopts mToken to empower its online customers with two-factor authentication, digital signature and secure storage

CARTES 2006, PARIS, Nov. 7, 2006 - msystems (NASDAQ: FLSH), a leader in smart personal storage, today announced the launch of mToken, a new USB-based platform that offers two-factor authentication, smart card-based services, secure storage and on-device applications for banking. The mToken platform also supports smart card-based enterprise and consumer applications in a variety of industries, including insurance, telecom, and healthcare. With the rise of identity theft, phishing and other online fraud, there is a strong need to offer portable, user-friendly smart card-enabled platform for seamless two-factor authentication and security services, such as digital signature and data encryption.

mToken from msystems is designed with ease of use in mind to enable consumers to securely authenticate for online services from anywhere, without the need to carry and install drivers and new software. With mToken, enterprises and OEMs can offer new, plug-and-play applications and additional smart card-based services to their customer base. mToken’s smart development tools help organizations to create specific user scenarios, customized applications and diversified offerings to meet the requirements of most any industry.

By plugging mToken into any connected computer with a USB slot and authenticating with a password, the customer gains easy access to applications, account information and enterprise and retail resources. Data stored on mToken is always encrypted with its smart card cryptographic key while additional on-device security layers protect the user from online identity theft.

“Intended to improve security as a way to increase the viability of online business, mToken was created with 3 S’s in mind: security; simplicity; and seamlessness,” said Daniel Schreiber, vice president of marketing and business development for msystems’ retail and enterprise division. “Based on msystems’ more than 17 years of flash expertise, robust intellectual property portfolio and advanced security technology deployed in millions of smart cards throughout the world, mToken contains innovative security features, secure storage and applications within a reliable, simple USB smart drive. As such, it represents a new way to securely enable online transactions across a wide range of industries.”

Bank Leumi, a leading Israeli financial group with an international network of more than 300 branches and offices throughout the world, is working with msystems to integrate mToken with its online banking services.

“Bank Leumi continuously seeks advanced technologies that enhance the quality and security of our customers’ online banking experience. We were very impressed with msystems’ new mToken solution which provides strong security features, as well as added benefits that will make it easier for our customers to bank online,” said Mr. Itzhak Malach, Leumi’s first executive vice president, head of operations, information systems and administration. “We are proud to lead the way in implementing this solution as a part of our eBanking security infrastructure, and see it as a valuable, secure platform for developing additional online financial services.”

mToken will be demonstrated during CARTES 2006, in Paris, November 7 to 9, where msystems executives will be on hand in booth #4K 026 to present the Company’s latest products and technological achievements. More information about the conference is available online at www.cartes.com/en/2006/index.htm. For more information about mToken, please contact msystems at mtoken@m-systems.com or go to www.m-systems.com/mtoken.

About msystems
msystems has been transforming raw flash material into smarter storage solutions since 1989. From embedded flash drives deployed in millions of mobile handsets to U3 USB smart drives designed for leading global brands, msystems creates, develops, manufactures and markets smart personal storage solutions for a myriad of applications targeting high growth markets.

More information is available online at www.msystems.com. msystems. made smarter.

About Leumi group
Leumi is the oldest and largest banking concern in Israel. The company was founded in London in 1902. Today it has 234 branches throughout Israel and 83 international centers, strategically located in 21 different financial centers around the world. The bank has 11,400 employees working around the globe.

The Leumi Group is one of the largest concerns in the Middle East. The Group has total assets of roughly NIS 273 billion and properties managed by the Group in 2005 worth NIS 565 billion. In 2005, Group profits rose by 14.6%, reaching NIS 2.136 billion.

More information is available online at www.leumi.co.il.

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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 msystems’ 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 msystems’ 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 msystems’ 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 msystems’ and its customers’ products; and other risk factors detailed from time to time in msystems’ filings with the Securities and Exchange Commission. msystems 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 msystems’ website above does not constitute incorporation of any of the information thereon into this press release.

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