Neoware Acquires Mangrove Systems - Expands Solutions

Neoware Systems (Nasdaq:NWRE) today announced that it has acquired privately-held Mangrove Systems to bolster its Linux software solutions and provide enhanced support and services in the European market.

Mangrove Systems provides embedded Linux solutions for OEMs, systems integrators and corporate customers. Mangrove's products include Linux thin client software, software to convert PCs into Linux thin clients, and a software development environment that enables systems integrators to quickly build robust Linux-based thin client solutions.

Neoware is the global leader in Linux thin clients with more than 40% market share of this segment of the PC market -- nearly four times its nearest competitor, according to industry analysts. Acquiring Mangrove further expands Neoware's leadership in the Linux thin client market by enhancing Neoware's software portfolio and providing Neoware with a European development center with Linux expertise.

"Mangrove has developed innovative Linux software solutions that will enhance Neoware's leadership in the fast-growing Linux market," stated Michael Kantrowitz, Chairman and CEO of Neoware. "By adding Mangrove's people and products, we can enhance our solutions with new software for OEM and corporate customers and with new support offerings in the European market."

Neoware has acquired all of the shares of Mangrove Systems for E2.0 million in cash and 153,682 shares of Neoware common stock, plus a potential earn out based upon performance. Neoware will operate the business as a wholly owned subsidiary based in Granville, France. Neoware has retained the executive management and all of Mangrove's current staff. Mangrove will continue to be led by Laurent Texier, who will be Mangrove's Managing Director.

"We are very excited by the opportunity to continue to develop and support our customers, products and services, now with the financial strength and backing of a global leader in the thin client business," commented Laurent Texier, Managing Director of Mangrove Systems. "Mangrove has grown our business by providing innovative software and excellent support to both corporate and OEM customers. Joining forces with Neoware provides us with global reach and a strong partner with whom we can continue to grow our business."

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our new software product and support offerings; the addition of the new Mangrove employees, including Laurent Texier; our leadership position in the fast-growing Linux thin client market; and the continued growth of Mangrove's business. These forward-looking statements involve risks and uncertainties. Factors that could cause actual results to differ materially from those predicted in any such forward-looking statement include: our ability to successfully integrate the Mangrove acquisition, including the retention of Mangrove's existing customers; our timely development and customers' acceptance of our products, including the former Mangrove products; our ability to continue to lower our costs; pricing pressures; rapid technological changes in the industry; growth of the Appliance Computing and host access software market; increased competition; our ability to attract and retain qualified personnel, including the former Mangrove employees; our ability to identify and successfully consummate and integrate future acquisitions; adverse changes in customer order patterns; adverse changes in general economic conditions in the U.S. and internationally, risks associated with foreign operations and political and economic uncertainties associated with current world events. These and other risks are detailed from time to time in Neoware's periodic reports filed with the Securities and Exchange Commission, including, but not limited to, its report on Form 10-K for its fiscal year ended June 30, 2004 and Form 10-Q for the quarter ended September 30, 2004.

Neoware Systems, Inc.
400 Feheley Drive
King of Prussia, PA 19406

Contact:
Keith Schneck
Chief Financial Officer
(610) 277-8300, ext. 1072
email: kschneck@neoware.com

Sharon O'Shea
V.P. Marketing Communications
(610) 277-8300, ext. 1743
email: sharon.oshea@neoware.com

Laurent Texier
Managing Director, Mangrove Systems
phone: 33 2 33 91 0620
email: ltexier@mangrove-systems.com

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