For the third quarter of fiscal 2005, CSP Inc. reported sales from continuing operations of $11.5 million compared with $14.0 million from continuing operations in the year-earlier quarter. CSP's third-quarter net income from continuing operations was $165,000, or $0.05 per diluted share, compared with $457,000, or $0.12 per diluted share, for the third quarter of fiscal 2004.

For the nine months ended June 30, 2005, the Company reported sales from continuing operations of $44.4 million compared with sales of $37.2 million from continuing operations for the first nine months of fiscal 2004. For the nine-month period of fiscal 2005, net income from continuing operations was $1.2 million, or $0.32 per diluted share, compared with $769,000, or $0.21 per diluted share, for the same period in the prior year.

Net income for the third quarter of fiscal 2005 including the discontinued operations was $ 211,000 or $.06 per diluted share, compared with $438,000 or $.12 per diluted share, for the third quarter of fiscal 2004. For the nine month period of fiscal 2005 net income including the results of discontinued operations was $1.2 million or $0.31 per diluted share compared with $688,000 or $0.18 per diluted share for the same period in the prior year.

CSP Reports Third-quarter Results/2

The Company's financial results for the three- and nine-month periods ended June 30, 2005 include a pretax gain of $114,000 from the previously announced sale of the assets of its Scanalytics subsidiary included in the income (loss) from discontinued operations.

"CSP's third-quarter performance was affected by a combination of factors at both our Multicomputer and MODCOMP businesses," stated Chairman, President and Chief Executive Officer, Alexander R. Lupinetti.

Systems

"After recording significant revenue in the first half of the fiscal year associated with shipments from three previous Multicomputer contract wins, we made fewer related shipments in the third quarter and we do not expect to record significant revenue from these programs for the remainder of the calendar year. Due to the project nature of CSP's Multicomputer business, our revenues are inherently very uneven."

"We are committed to investing in new product development in order to build our customer base and reduce the volatility of our Multicomputer revenues," continued Lupinetti. "During the quarter, we announced the introduction of two products that answer customer needs for open source ruggedized multicomputers. The StarGate 2924R Rugged Blade is designed to meet Level III Ruggedization specifications for shock, vibration, humidity, altitude and temperature. We also introduced the industry's first scalable, open-source, conduction cooled blades for extreme environmental conditions."

Services and Systems Integration

"Two factors contributed to lower year-over-year revenues at CSP's MODCOMP subsidiary," said Lupinetti. "First, as the result of a slight softening in the European demand environment, we did not experience the shortened sales cycles and resulting pull-through at our German subsidiary during the third quarter as we did in the second quarter. While we do not anticipate a sequential increase in European sales during the seasonally slow fourth fiscal quarter, we expect our first fiscal quarter of 2006 to be stronger as companies make calendar year-end purchasing decisions. Business remained robust at our U.S.-based Systems and Solutions Division (SSD), which provides best-of-breed solutions for integrated IT environments.

CSP Reports Third-quarter Results/3

We remain well positioned for long-term growth at both of our businesses. At our Multicomputer business, we continue to innovate our product line, providing customers with solutions for specific and challenging embedded computing applications. At MODCOMP, our reputation for unparalleled product knowledge and industry expertise gives us a distinct competitive edge. We plan to leverage these strengths to grow CSP over the long-term."

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. (Nasdaq: CSPI - News) and its subsidiaries develop and market best-of-breed IT solutions, image processing software, 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 Web site at www.cspi.com. To learn more about MODCOMP, Inc., consult www.modcomp.com.

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