Nortia Research: Immersion mid-quarter update

December 2008

Demand for Immersion's Solutions Drives Record Revenue

Immersion’s third quarter revenues surpassed $10 million, marking the highest quarterly revenue in the company’s history. Touch user interfaces are proliferating in systems and devices on a global basis and record revenue was driven by strong demand for, and adoption of, Immersion’s solutions across multiple end-markets.

Read on to acquire a deeper understanding of how Immersion is driving the development of exciting new products to address the growing worldwide trend of incorporating touch feedback in digital user interfaces. Immersion owns the world’s most comprehensive portfolio of patented haptics technology, and in this newsletter you will learn more about the company’s unique approach to high-growth, global markets for highly differentiated Medical and Touch products.

For fastest response to your questions or comments, contact us at http://ir.immersion.com/contactus.cfm.


In This Issue

›Record Revenue

›Medical

› Touch

	›	Touch Interface Products

	›	Mobility

	›	Gaming

›Corporate Developments

›Immersion in the News

›Events


Immersion in the News

“The VibeTonz feature is the coolest thing. Little vibrations based on touch screen selections or scrolling etc. It’s hard to describe so I’ll just say two words that have stuck with me… ‘touch sensation.’” (From GeekwithLaptop.com review of Samsung F700 phone. (See review.). “The touchscreen was not a chore to use. In many instances, it can be terribly difficult to press a simple button on the screen. Not so in this case. Scrolling up and down was fun and smooth; haptic feedback made it easy for me to know when I had pressed something; and it was easy to manuever around to various menus and pages within the device.” (From Unwired View review of Samsung AT&T Eternity phone. See review.). “I have seen the future and it is the Remote Touch interface found in the all-new Lexus RX SUV . . . With the Remote Touch controller under your fingertips returning haptic feedback, your eyes don’t need to be glued to the screen all the time.” See article. A recent article by APPLIANCE Magazine explains how haptic feedback systems can improve the usability of next generation touch controls by providing confirmation in response to user interactions -- in products ranging from kitchen appliances and office machines to fitness equipment and medical devices. See article.


Events

Immersion and several of its customers will exhibit touch interface, mobility, and gaming products and technology at the Consumer Electronics Show (CES), January 8-11, 2009, Las Vegas Convention Center, South Hall 2, booth #26115 Immersion to present at the 11th Annual Needham Growth Stock Conference, January 8, 2009, 4:30 PM Eastern Time at The New York Palace Hotel, New York City

Medical

Immersion’s medical and surgical simulators are revolutionizing the fields of medical training and education. Doctors and medical professionals seek out Immersion’s solutions to achieve the most realistic experience for simulating medical procedures. As the largest contributor to Immersion’s revenue on a percentage basis, the medical line of business is one of the most important growth drivers for the company. To fully capture this tremendous global market opportunity, Immersion is aggressively building its medical line of business for predictability and scale.

CEO Clent Richardson Elevates Awareness in China

Cementing Immersion’s position as a key player in the rapidly growing medical training market in China, CEO Clent Richardson participated in two high-profile events in Beijing in November: The International Forum on the Future of Simulator Education in China (read more, see photos) and a company sponsored, in-depth media event with top publications including China Computer World, Mobile China, E-Health Care, Economic Information News, and CBN Weekly. (See photos).

Company Expands Global Distribution of Medical Simulators in China

Significant growth in China’s economy and healthcare infrastructure has created a tremendous need for medical simulation and education solutions. Creating relationships with local distributors is one method of capturing opportunities globally. To this end, Immersion has forged a strategic distribution agreement for Immersion Medical surgical simulators in China with Tellyes Scientific Company, Ltd. of Tianjin, China, a leading supplier of advanced medical education products. See press release, see photos of signing ceremony.

Immersion Medical Makes Strides in Burgeoning Latin American Market

Demonstrating the need for Immersion’s medical solutions globally, the company has sold three simulation systems to Universidad de Pamplona in Cucuta, Colombia: an Endoscopy AccuTouch® System, a LaparoscopyVR™ surgical simulator, and a CathLabVR™ simulation system. Immersion Medical was also a key participant in the first Colombian Symposium of Clinical Simulation (website) in Bogota in October, another unmistakable indicator of growing interest for medical simulation in Latin America. Read more.

Touch Interface Products

Immersion is deeply engaged in accelerating the rate of growth for its Touch Interface Products business, where in addition to its touchscreen feedback and automotive products, its haptics technology is becoming increasingly relevant to an expanding number of vertical markets including Consumer Electronics, Office Automation, and Machine Controls. Growing uptake for the company’s solutions includes an expanded licensing agreement with Samsung for TouchSense® technology in digital audio devices (see press release), design wins with licensee SMK for machine and factory automation controls (see press release), and touch feedback in a touchscreen-based navigation system for a major U.S. car rental company.

TouchSense Technology Powering New Driver Control in 2010 Lexus RX

A 2D haptic device with Immersion technology developed by Alps Electric was integrated by Denso Corporation into the 2010 Toyota Lexus RX. Toyota, the world’s largest auto manufacturer, is using the device to elevate the automotive user experience, especially safety. The Remote Touch haptic control tips and tilts in all directions, moving a cursor on a screen above. When the cursor moves over different icons, like buttons, the driver feels haptic feedback. The system gives Lexus designers more flexibility in positioning the navigation/audio display, such as very near to the driver’s peripheral view of the road – a clear safety advantage. Watch CNET video.

Immersion’s Haptics Technology Widely Featured at G2E 2008

Immersion’s haptics technology for casino gaming systems was prominently featured at the 2008 Global Gaming Expo (press release). 3M, as well as numerous gaming system integrators, demonstrated the technology in new products.

Mobility

Global leaders in the mobile market are rapidly expanding the implementation of haptics technology across their product lines. Immersion remains at the forefront of innovation for this sector. In fact, more than 35 million mobile phones featuring Immersion’s haptic technology have now been sold worldwide, including more than ten million in the third quarter of 2008 alone. These include many of today’s popular, high volume phones including the LG Incite and the Samsung Soul and Tocco. (Read more).

Samsung Sees Strong Sales of Haptic 2 Phone Featuring Immersion's VibeTonz® System

The follow-up to its highly successful Haptic phone for the Korean market, Samsung’s Haptic 2 is the first phone using Immersion’s technology to allow users to create their own haptic effects. Through a simple but powerful drag-and-drop graphical interface, users can personalize touch feedback such as distinct non-audible ringtones. More than 100,000 Haptic 2 phones were sold in the first four weeks following launch. Read more.

Gaming

New Gaming Peripherals Shipping for Holiday Season

The addition of haptics and force feedback technology dramatically revs up the gaming experience, whether played on a console, PC, or mobile device. Hot gaming peripherals for the gift-giving season featuring Immersion’s TouchSense force feedback are now available in major retail stores and online, including Katana’s new wireless PS2 controller and Logitech’s Speed Force Wireless Wheel for the Wii. In addition, gamers will soon be treated to dreamGear’s CES Innovations award winner, the Shadow Wireless controller for the PS3, the first of a number of TouchSense-enabled products to be released by this prominent licensee.

Corporate Developments

Immersion Attracts New Talent to Executive Team

The company is making significant and measurable progress in transforming its executive team, attracting proven leaders who share a vision and passion for Immersion’s technology as the future of both medical education and training and the user experience in digital devices.

Dan Chavez has joined as senior vice president and general manager, Immersion Medical. See press release.
Craig Vachon was appointed vice president and general manager, Mobility. See press release.
Amie Peters has joined as vice president, Legal. See press release.

Immersion to Divest 3D Business

To focus global strategy on the most potent growth markets in its portfolio, the Medical and Touch lines of business, Immersion will conclude divestiture of its 3D business in the first quarter of 2009. See press release.