msystems™ Sees New Opportunities in the Growing USB Flash Drive Market

High awareness rates and trend toward market segmentation, according to independent survey, indicate new opportunities in the UFD market

SUNNYVALE, Calif., July 19, 2006, msystems (Nasdaq: FLSH), a leader in smart personal storage and creator of the USB flash drive (UFD), today released results of an independent survey which indicates that the UFD market is evolving with features such as data security, operating system compatibility, reliability and ease-of-use influencing customer purchasing decisions to a greater degree compared to previous analysis.

“msystems, a leading provider of UFDs worldwide, commissioned this survey, which shows that people in this growing market want more than just the highest density at the lowest price. Customers want security, applications and other premium features in their UFDs, features they weren’t seeking before,” said Daniel Schreiber, vice president of marketing and business development for the msystems retail and enterprise division. “These conclusions support our assertions about the coming second wave of UFD market growth, which is being driven, in part, by the U3 platform and other product differentiators.”

Survey results also indicated that UFD owners now typically possess more than one device, indicating that current ownership is by no means a barrier to the purchase of more UFDs.

“msystems is in tune with the evolving UFD market, bringing even more benefits to its international brand partners and their customers,” said Noam Kedem, vice president of marketing for msystems. “Given the increasing sophistication of consumers, companies offering smarter UFD products which are more tailored to different end-user segments will likely be in a better position to ride the second wave of growth of the UFD market in the years to come.”

According to this recent survey of 1,000 US computer users aged 14-64 conducted for msystems by Harris Interactive, an independent market research firm known for The Harris Poll®, 30 percent are currently UFD owners, with an additional 13% intending to purchase a UFD in the near future.

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. msystems’ product lines include:

* mDrive (formerly DiskOnKey®) U3 USB smart drives for personal, portable computing
* mDOC embedded flash drives for mobile handsets and consumer electronics devices
* mSIM MegaSIM® series high-density SIM cards and mSIM M.MAR® series SIM cards and highly secure cards (available both from msystems and its subsidiary Microelectronica)
* mCard, high-quality memory cards for mobile handsets and digital cameras
* mTrust (formerly Xkey®) end-to-end enterprise access, control and management solution for USB flash drives and other removable media
* mSSD (formerly FFD™) rugged solid state disks for mission-critical applications
* mModule (formerly DiskOnChip® modular family) modular flash storage for embedded systems
* mSafe (formerly SuperMAP® family) secure hardware and software crypto cores

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


Note to Editors:
Other insight gained from this survey and additional information about the USB flash drive (UFD) market is available from msystems via dcoates@brodeur.com or through contacts listed online at www.m-systems.com/site/en-US/Contact/MsysWorldWide.
High-resolution photo images of msystems’ products can be found on the Internet at www.m-systems.com/site/en-US/Corporate/PressRoom/ImageLibrary

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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.

Contact Information

David Coates

Media Contact for North America

Brodeur Worldwide

Contact via E-mail