M-Systems to Expand the Xkey® Product Line to Include Enterprise Software for Managing and Securing USB Flash Drives and Other Personal Storage Devices

Business Wire, Sept 30, 2005

SUNNYVALE, Calif. -- M-Systems (Nasdaq: FLSH), an industry leader and innovator of flash-based data storage devices, today announced that the Company has expanded its Xkey(R) product line to include enterprise software that allows corporate IT departments to manage and secure USB flash drives (UFDs) and other personal storage devices.

"As a leading provider of UFDs, M-Systems understands that organizations require software to effectively manage and secure usage of these devices," said Raz Rafaeli, M-Systems' vice president of corporate solutions. "M-Systems is developing enterprise software and intends to partner with leading technology vendors to enhance its product offering."

M-Systems is cooperating with ControlGuard, a leading provider of endpoint security solutions, to allow the Company to use ControlGuard's endpoint security technology within the Xkey product line.

"Embedding ControlGuard's technology in M-Systems' new line of products to the enterprise market is the fruit of a cooperation agreement that will potentially allow M-Systems customers around the world to safely and efficiently monitor and control portable storage devices through our secure platform," said Israel Levy, ControlGuard's chief executive officer."

For more information about M-Systems' Xkey product line, please visit www.m-systems.com/xkey or contact M-Systems directly at XkeyInfo@m-systems.com.

About ControlGuard

ControlGuard is a leading provider of enterprise-grade, endpoint security systems. Banks, Security Agencies, Insurance companies and other enterprises rely on the ControlGuard software to protect thousands of endpoints across their organization from internal breach of security. The ControlGuard team has unmatched experience in enterprise security and management and is ready to help you secure your enterprise data from theft, misuse and corruption. More information about ControlGuard is available online at www.controlguard.com.

About Xkey

The Xkey solution allows enterprises to securely mobilize data using USB flash drives (UFDs) and other personal storage devices. Xkey ensures that business professionals store sensitive information on secure Xkey drives, and allows IT departments to control all other removable media and centrally manage corporate-deployed UFDs. More information on Xkey is available at www.m-systems.com/Xkey

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) solutions 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.