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Immersion Corporation The Haptics, VibeTonz and TouchSense company

Contracts with Nokia, Samsung, LG, Medtronic, VW, BMW, Microsoft, Sony & 3M’s touch screen division to name a few.

Enjoys over $4.00 in cash per share and 25+% growth year over year, 700+ patents in the area of haptic (leader in tactile feedback) technology.  Majority of business is outside of the United States.  Beneficiaries from haptics include consumer electronics, automotive and critical application training environments. 

Consumer electronics are purchased / upgraded when new features become available to the consumer. The touch screen revolution has inadvertently removed the tactile sensation of depressing a button (Immersion’s haptic patents address the lack of tactile feedback).  Touch screens provide greater screen geography and when manufactured in quantity there should be a reduction in production cost: Combined with the ease of reprogramming the look of the finished product.  These two aspects suggest the consumer will be offered touch screen devices if they like the interface or not.  Strategy Analytics projects 40% of all cell phones will use touch screens by 2012.           

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Immersion’s Mobility Division is a perfect storm.  In December 2006 Immersion’s Vibetonz technology was used in only 5 cellular telephones.  Current count is more than 50 cell phones.  The www.vibetonz.com web site is managed by Immersion Corporation however it is not updated as quickly as the new phones hit the market.  The New LG “Dare” and Samsung “Instinct” are examples of commercially available products not listed.

The convergence of MP3 and Digital Video players, Digital Cameras, Navigation Devices, Televisions and Mobile Internet with Instant Messaging, Text Messaging and Cellular Telephones fuels the need for increased screen geography.  The pull of increased screen geography for these pocket sized mobility devices drives the need for haptics.         

July 3rd 2007 Nokia the 800 pound Gorilla of the Cell Phone industry signed on with Immersion and will be shipping the first of many Vibetonz phones in the U.S. during the second half of 2008.  First Quarter 2008 Nokia enjoyed a 39.1% world wide market share.  During an earlier Immersion conference call Vic Viegas of Immersion said Nokia’s pricing structure has discounts for volume to encourage a greater installed base of Vibetonz enabled phones.  I anticipate (pure speculation on the author’s behalf) a deluge of Nokia touch screen phones on the market by year end.  If I am correct (?) this could easily translate into fifty million units sold in 2008.   

Samsung ranked #2 and LG #4 on the list of cell phone makers are licensees of Immersion’s Patents.  Their products make up most of the products listed on the www.vibetonz.com web site.  Samsung recently replaced Motorola in the #2 position and LG’s Voyager was last Christmas’s iPhone killer.  Mobility licensing revenues increased by 1000+% over 2006; granted 2007 enjoyed the beginnings of the touch screen revolution and 2006 numbers were small…..never the less the 2007 trend is difficult to debunk. Call me a “Pump and Dump” promoter but in my mind 2008 growth is bound to impress. 

The 2007 Immersion Annual Report states on page 4 of the .pdf; “In February 2008, we announced that 10 million mobile phones with Vibetonz Technology have been shipped by our licensees, including over 5.5 million shipped in 2007”  If you recall my earlier remarks concerning the number of Vibetonz enabled phones listed on the www.vibetonz.com web site in December 2006….I think it is a conservative estimate to say that the first 6 weeks of 2008 equates to close to 4 million units.  The touch screen volume exploded following the introduction of the iPhone and the majority of the cell phones sold prior to the iPhone release loaded with Vibetonz were specialty “Gaming” phones.  Do the Math!!!  2008 numbers should be much stronger than the street expects and remember licensing revenue is pure profit. 

The Apple iPhone 3G hardware appears (?) to be loaded with the Immersion approved actuator.  If you read the recent Walter Mossberg iPhone 3G write up in the Wall Street Journal.  Mossberg states the iPhone 3G has the ability to provide variable frequency haptics when playing a game.  It is my belief (not shared by everyone) that Apple and Immersion have not agreed on price….otherwise we would hear more about this alliance.  A friend suggested an alternate method of creating the feel of variable frequency haptics by starting and stopping the actuators rotations.  Granted this would be a sleazy work around but the trickery might satisfy the unsophisticated investor.  Perhaps a wireless wizard might help us mortals?

3M touch screen division (applications includes casino gaming, ATM’s, Kiosks and waiter and waitress stations).  As of the third quarter 2007 “thousands of units shipped” to quote Immersion Chairman Victor Viegas in the 2^nd Quarter 2007 conference call.  My interpretation is sales are ramping up as old inventory at 3M is exhausted.  May 29^th 2008 3M Touch Systems received top honors from Casino Journal because adding haptics to new and old video slots improves the user experience. 

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2.) Medtronic and Immersion’s Medical division are distributing Immersion Medical simulation products.  In 2008 Immersion is attending over 30 trade shows.   Current product offerings include (list is incomplete):

            a. Endoscopy AccuTouch® System

b. Endovascular AccuTouch® System

c. LapVR™ Surgical Simulator (Laproscopy)

d. Virtual I.V. Self-Directed Learning System

e. InsightArthroVR™ arthroscopy surgical simulator

f. SimCapture medical simulation training management

The Medical Division harvests the great Einstein quote, “Linear thinking is the slave and intuition is the gift; society honors the slave and ignores the gift”.  The Medical community is now recognizing great doctors not only need to pass the required written tests but they must also be capable of snaking a catheter through a vein deep inside a human body.  As a Chiropractor friend said to me, “there is no guarantee an “A” student possesses the physical dexterity to properly adjust a patient’s lower back”.  Immersion’s Medical Division produces numerous simulators to bridge the gap between the left brain theoretical practice and right brain practical exercise while reducing malpractice claims and worse.  My limited research suggests Medical schools are now taking an interest in simulators and this Immersion Division is positioned to benefit from this trend.  Lastly Immersion is pursuing legal action against a competing Medical Simulation Device provider for Patent infringement.  Morgan Chu http://www.irell.com/professionals-22.html  will again pursue the wrong doers for Immersion.  In Morgan Chu we trust!.

Written by a long time Immersion Stock Holder, I have been following this story since 2002 and never has the stock been a better buy, in my honest opinion. Please do your own due diligence, and consult a broker before making any investment decision.

jploos@yahoo.com