Immersion Corp. Reports Q1 2006 Financial Results

SAN JOSE, Calif.—(BUSINESS WIRE)—May 4, 2006— Immersion Corporation, (Nasdaq: IMMR), a leading developer and licensor of touch feedback technology, today announced its first quarter 2006 financial results. Revenues were $6.0 million for the quarter ended March 31, 2006 compared to revenues of $5.8 million for the first quarter of 2005, an increase of 5 percent. Net loss on a Generally Accepted Accounting Principles (GAAP) basis for the first quarter of 2006 was $2.9 million, or $0.12 per share, an improvement of 7 percent compared to a net loss on a GAAP basis of $3.1 million, or $0.13 per share, for the first quarter of 2005. Net loss for the three months ended March 31, 2006 included stock-based compensation expense of $723,000, equal to $0.03 loss per share. Net loss for the three months ended March 31, 2005 did not include any stock-based compensation expense. As of March 31, 2006, Immersion had cash and cash equivalents totaling $30.9 million as compared to $28.2 million as of December 31, 2005.

"Consistent with the video console industry, our gaming revenue continues to be weak, while our medical revenue grew 19 percent compared to the first quarter last year. We expect growth of medical revenue to continue, given our new product development and the increasing acceptance of medical simulators as an effective training tool," explained Immersion CEO Vic Viegas.

"New wireless operators such as Orange and T-Mobile are using our VibeTonz(R) technology for mobile phones, expanding our reach in the market," said Viegas. The first VibeTonz-enabled GSM mobile phone, the Samsung SGH-E770, launched in Europe in January and is now being sold in numerous countries directly through operators and by retail stores. A similar phone, the Samsung SGH-E778, is being sold in China and Taiwan. Over twenty content providers have published more than thirty-five mobile games with VibeTonz effects, and more are in development.

Regarding Immersion's patent infringement suit against Sony Computer Entertainment, Inc. and Sony Computer Entertainment of America, Inc. (Sony), on March 8, 2006, the U.S. District Court for the Northern District of California denied in its entirety Sony's motion seeking relief from the final judgment under Rule 60B of the Federal Rules of Civil Procedure. Sony's appeal of the District Court's judgment, which includes a $90.7 million award, an injunction (stayed pending appeal), and a compulsory license, was filed with the United States Court of Appeals for the Federal Circuit on June 16, 2005. Appeal briefing is expected to be complete by the end of May 2006. "We remain confident of our position in the appeal process," concluded Viegas.

Immersion will host a conference call with company management on Thursday, May 4, 2006, at 5:00 p.m. Eastern time to discuss operating results for the first quarter ended March 31, 2006. A question and answer session will follow. To listen to the call, dial +1 800.374.2366 approximately five minutes prior to the start of the call and enter confirmation number 2397923. The call will be archived and available for replay through May 11, 2006, by dialing +1 800.642.1687 and entering confirmation number 2397923. The call will also be simulcast on the Internet through Immersion Corporation's Web site, www.immersion.com. An audio replay of the call will be archived and available at www.immersion.com for replay until May 4, 2007.

About Immersion ( www.immersion.com)

Founded in 1993, Immersion Corporation is a recognized leader in developing, licensing and marketing digital touch technology and products. Bringing value to markets where man-machine interaction needs to be made more compelling, safer, or productive, Immersion helps its partners broaden market reach by making the use of touch feedback as critical a user experience as sight and sound. Immersion's technology is deployed across automotive, entertainment, medical training, mobility, personal computing, and three-dimensional simulation markets. Immersion's patent portfolio includes over 600 issued or pending patents in the United States and other countries.

Forward-Looking Statements

This press release contains "forward-looking statements" that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause the results of Immersion Corporation (the "Company") and its consolidated subsidiaries to differ materially from those expressed or implied by such forward-looking statements. All statements, other than the statements of historical fact, are statements that may be deemed forward-looking statements, including any projections of earnings, revenues, or other financial matters; any statements of the plans, strategies, and objectives of management for future operations; any statements concerning consumer or market acceptance of simulator products for medical training, continuing education or evaluation, or consumer and market acceptance of touch feedback products in general; any statements concerning the breadth of and timeline to implement touch feedback technology into handset models or into games or other content, release of VibeTonz-enabled handsets, release of content by service providers, or any change in revenue that may occur from such implementation; any statements regarding consumer response that may occur as a result of having touch feedback in handsets or content, proposed products or services; any statements regarding future economic conditions or performance; any statements regarding projections of earnings, revenues, or other receivables which are contingent upon Sony's compliance with court orders; statements regarding Immersion's ability to keep any cash received from Sony to date after completion of the appeals process or other judicial proceedings; statements regarding the prospects and consequences of any negative rulings from the appeals court on the judgment, including the damages award; and statements of belief or assumptions underlying any of the foregoing. Immersion's actual results might differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with Immersion's business which include, but are not limited to, delay in or failure to achieve commercial demand for Immersion's expanded technology offerings; a delay in or failure to achieve the acceptance of force feedback as a critical user experience in new and existing markets for our business segments; and risks and uncertainties associated with the ongoing litigation.

For a more detailed discussion of these factors, and other factors that could cause the Company's actual results to vary materially, interested parties should review the risk factors listed in the Company's most current Form 10-K, which is on file with the U.S. Securities and Exchange Commission. The forward-looking statements in this press release reflect the Company's beliefs and predictions as of the date of this release. The Company disclaims any obligation to update these forward-looking statements as a result of financial, business, or any other developments occurring after the date of this release.

Immersion, the Immersion logo, and VibeTonz are trademarks of Immersion Corporation in the U.S. and other countries. All other trademarks are the property of their respective owners.

                        Immersion Corporation
                Condensed Consolidated Balance Sheets
                            (In thousands)

                                              March 31,   December 31,
                                                2006          2005
                                             (Unaudited)       (1)
                                             ------------ ------------
ASSETS
  Cash and cash equivalents                      $30,945      $28,171
  Accounts receivable, net                         3,766        4,650
  Inventories                                      2,661        2,655
  Prepaid expenses and other current assets        1,089              1,131
                                                                                          ------------  ------------
            Total  current  assets                                                38,461              36,607

    Property  and  equipment,  net                                            1,393                1,366
    Intangibles  and  other  assets,  net                                6,856                6,787
                                                                                          ------------  ------------

TOTAL  ASSETS                                                                          $46,710            $44,760
                                                                                          ============  ============

LIABILITIES
    Accounts  payable                                                                    $890              $2,179
    Accrued  compensation                                                          1,219                1,193
    Other  accrued  liabilities                                                1,803                1,604
    Deferred  revenue  and  customer  advances                      2,038                2,741
    Current  portion  of  long-term  debt                                        3                        5
                                                                                          ------------  ------------
            Total  current  liabilities                                        5,953                7,722

    Long-term  debt                                                                    17,648              17,490
    Long-term  liabilities  and  deferred  revenue            26,595              21,343
    Long-term  customer  advance  from  Microsoft              15,000              15,000
                                                                                          ------------  ------------
            Total  liabilities                                                      65,196              61,555

STOCKHOLDERS'  DEFICIT                                                        (18,486)          (16,795)
                                                                                          ------------  ------------

TOTAL  LIABILITIES  &
STOCKHOLDERS'  DEFICIT                                                        $46,710            $44,760
                                                                                          ============  ============

(1)  Derived  from  the  Company's  annual  audited  financial  statements.


                                                Immersion  Corporation
                      Condensed  Consolidated  Statements  of  Operations
                              (In  thousands,  except  per  share  amounts)
                                                          (Unaudited)

                                                                                                              Three  Months
                                                                                                            Ended  March  31,
                                                                                                              2006          2005
                                                                                                          --------  --------
Revenues:
    Royalty  and  license                                                                  $1,910      $2,471
    Product  sales                                                                                3,366        2,695
    Development  contracts  and  other                                                756            606
                                                                                                          --------  --------
                  Total  revenues                                                                6,032        5,772
                                                                                                          --------  --------

Costs  and  expenses:
    Cost  of  product  sales  (exclusive  of  amortization  of
      intangibles  shown  separately  below)                                  1,355        1,389
    Sales  and  marketing                                                                    3,077        2,819
    Research  and  development                                                          1,729        1,509
    General  and  administrative                                                      2,811        2,286
    Amortization  of  intangibles  and  deferred  stock
      compensation                                                                                    210            367
    Litigation  settlement                                                                  (650)              -
    Restructuring                                                                                        -            185
                                                                                                          --------  --------
                  Total  costs  and  expenses                                            8,532        8,555
                                                                                                          --------  --------

Operating  loss                                                                                (2,500)    (2,783)
Interest  and  other  income  (expense),  net                                (304)        (285)
                                                                                                          --------  --------

Loss  before  provision  for  income  taxes                                (2,804)    (3,068)

Provision  for  income  taxes                                                            (102)          (65)
                                                                                                          --------  --------

Net  loss                                                                                          $(2,906)  $(3,133)
                                                                                                          ========  ========

Basic  and  diluted  net  loss  per  share                                    $(0.12)    $(0.13)
                                                                                                          --------  --------

Shares  used  in  calculating  basic  and  diluted  net
  loss  per  share                                                                              24,419      23,663
                                                                                                          --------  --------


                                                  Immersion  Corporation
                                      Additional  Financial  Information
            Effect  of  Non  Cash  Stock-Based  Compensation  included  within
                        Condensed  Consolidated  Statement  of  Operations
                                                        (In  thousands)
                                                            (Unaudited)
                                                                                  
                                                                                
                                                                                                    Three    
                                                                                                    Months                  
                                                      Three                                    ended              Three
                                                      Months        Non  Cash        March  31          Months
                                                      ended      Stock-Based          2006,            ended
                                                    March  31  Compensation  exclusive  of  March  31
                                                        2006,        included          Non  Cash          2005,
                                                          as              within        Stock-Based          as
                                                    reported        expense      Compensation  reported
                                                    --------  ------------  ------------  ---------

Costs  and  expenses
    Cost  of  product  sales        $1,355                    $19              $1,336        $1,389
    Sales  and  marketing              3,077                    286                2,791          2,819
    Research  and  development    1,729                    129                1,600          1,509
    General  and
      administration                      2,811                    289                2,522          2,286
    Other,  net                                  (440)                      -                  (440)            552
                                                    --------  ------------  ------------  ---------

Total  costs  and  expenses      $8,532                  $723              $7,809        $8,555
                                                    ========  ============  ============  =========

There  was  no  Non  Cash  Stock-Based  Compensation  included  within  the
financial  results  in  the  three  months  ended  March  31,  2005.
 


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