For the second quarter of fiscal 2006, CSP Inc. reported sales of $17.6 million compared with $18.7 million in the second quarter of fiscal 2005. Net income for the second quarter was $1.0 million, or $0.27 per diluted share, compared with $750,000, or $0.20 per diluted share, in the second quarter a year ago. CSP's second-quarter fiscal 2006 net income includes an expense of approximately $384,000 for professional fees related to the previously announced restatement of the Company's interim and annual financial results for fiscal 2004 and fiscal 2003.

The Company recorded equity-based compensation expense of $62,000 for the quarter under SFAS 123R for employee and director stock options and the employee stock purchase plan.

"CSP Inc. performed well in the second fiscal quarter," said Alexander R. Lupinetti, chairman and chief executive officer of CSP Inc. "We reported a 38 percent year-over-year increase in quarterly net income, driven by solid margin performance in our Systems segment from our Multicomputer Division as a result of increased revenues and improved overhead absorption."

"Our Multicomputer Division revenues were from shipments related to a new program win as well as other deployments," continued Lupinetti. "During the quarter, we announced that we had been awarded a contract to supply FastCluster 2000 SERIES computers for Lockheed Martin's real-time computing platform in support of the U.S. Navy's Radar Scene Generation (RSG) Program. The RSG provides a test and evaluation resource at the Navy's Combat System Engineering Development Site for the Aegis Combat System. We shipped a FastCluster system in the second quarter for approximately $1 million to support the first phase of the program. We plan to ship additional FastCluster multicomputers to fulfill the requirements of the RSG program."

"We also announced the introduction of our second-generation FastCluster 3000 Series, which provides our customers with the most advanced interconnect technology available today," added Lupinetti. "We have already begun to see interest in this offering from our customers. Looking ahead, we continue to anticipate significant opportunities for our fully ruggedized open source multicomputer products. As in the past, however, we expect revenues to continue to be lumpy as a result of timing of shipments."

"At MODCOMP, which operates in our Service and Systems Integration segment, our overall market share remains solid and we continue to see demand for our IT systems integration services and best-of-breed integrated IT solutions," said Lupinetti. "However, in order to cut costs, two integration services customers of our German subsidiary have significantly reduced their contract service levels. To align our workforce with current business volume, we are in the process of negotiating a reduction of our German staff. As a result, we expect to incur costs in the range of approximately $500,000 spread over the next two to three quarters. At our U.S.-based IT Systems and Solutions division, we are adding to our sales force to grow our market position as a provider of solutions for integrated IT environments."

The Company wishes to take advantage of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995 with respect to statements that may be deemed to be forward-looking under the Act. Such forward-looking statements may include, but are not limited to, those relating to continued multicomputer shipments to fulfill the requirements of the RSG program, future opportunities for the Company's multicomputer products, the lumpy nature of the Company's revenues as a result of the timing of shipments, demand for MODCOMP's services and solutions, and the its plans to enhance margins through strict cost controls and operating efficiencies. The Company cautions that numerous factors could cause actual results to differ materially from any forward-looking statements made by the Company. Such risks include general economic conditions, market factors, competitive factors and pricing pressures, and others

described in the Company's filings with the SEC. Please refer to the section on forward-looking statements included in the Company's filings with the Securities and Exchange Commission.

About CSP Inc.

Based in Billerica, Massachusetts and founded in 1968, CSP Inc. and its subsidiaries develop and market best-of-breed IT solutions, systems integration services, and high-performance computer systems. CSP's Systems segment includes the MultiComputer Division, which supplies high-performance Linux cluster systems for a broad array of defense applications, including radar, sonar and surveillance signal processing. The Company's MODCOMP, Inc. subsidiary, also part of its Service and Systems Integration segment founded in 1970 and which includes the fiscal 2003 acquisition of Technisource, is a leading provider of IT solutions and systems integration services. MODCOMP works with third parties to develop customized solutions in the global IT markets and has offices in the U.S., U.K. and Germany. More information about CSP is available on the company's website at www.cspi.com. To learn more about MODCOMP, Inc., consult www.modcomp.com.

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