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Press Release

Apr 29, 2002

Immersion Corporation Reports First Quarter Results

Immersion Corporation Reports First Quarter Results SAN JOSE, Calif., Apr 29, 2002 -- Immersion Corp., (Nasdaq:IMMR), a leading developer and licensor of haptic feedback technology, today announced that first quarter 2002 revenues were $4.8 million. Revenue breakouts for the quarter, and versus the first quarter of 2001, included product revenues of $2.4 million, a decline of 20%; $1.2 million in royalty revenues, a decrease of 17%; and $1.2 million in development contract revenues, an increase of 36%.

Net loss was $3.7 million for the first quarter of 2002 or $0.19 per share compared to a net loss of $4.7 million for the first quarter of 2001 or $0.25 per share. The pro forma net loss, which is the net loss excluding amortization of intangibles and deferred stock compensation and acquisition related and other charges, was $2.3 million for the first quarter of 2002 or $0.12 per share compared to a net loss on a pro forma basis of $3.4 million for the first quarter of 2001 or $0.18 per share.

"We continued to manage our costs down and move closer to profitability during the quarter," said Vic Viegas, President, COO and CFO. "Our gross margin improved to over 73% and our royalty revenues grew 63% year over year, excluding a one time royalty payment of over $700,000 in the first quarter of last year. The Company's cash consumption during the quarter was $1 million, before giving effect to new licensing initiatives concluded during the quarter. The funds related to these new licenses were not collected until April, thereby improving our pro forma cash position to nearly $17 million from approximately $12 million as of our balance sheet date."

Mr. Viegas continued, "In addition, during the most recent quarter, we entered into a long term automotive licensing agreement with ALPS Electric which provides Immersion with an important licensing and royalty financial component in our industrial/automotive segment business model. The collaboration with ALPS that began with the new iDrive Controller in the 2002 BMW 7 Series car is continuing with this multi-million dollar opportunity which will further Immersion's presence in this market. ALPS will now have the ability to work directly with automotive manufacturers in the development and commercialization of haptic technology. With experienced engineering capabilities, an extensive worldwide sales team and established production and supply channels, ALPS can accelerate the adoption of haptic interface products within the automotive market."

Additionally, Immersion's Medical Simulation subsidiary had a record quarter with revenues of $1.4 million, a 16% increase over the first quarter of 2001. "Demand for the AccuTouch Endoscopy system is especially strong," said Bob O'Malley, Immersion Chairman and CEO. "We continue to add to product platforms and software procedures for each of our platforms to solidify our market leadership position." Commenting on the patent infringement lawsuit that Immersion recently filed against Microsoft and Sony Computer Entertainment, O'Malley continued, "The case is proceeding as expected. We believe that our position is strong and as an Intellectual Property company we need to defend our patent rights."

About Immersion Corporation (

Founded in 1993, Immersion Corp. is a recognized leader in developing, licensing and marketing haptic technology and products. Bringing value to markets where user/product interaction needs to be made more compelling, safe or productive, Immersion helps its partners develop and increase competitive advantage and broaden market reach by making the use of touch sense feedback as critical a user experience as sight and sound. Immersion's technology is deployed across personal computing, entertainment, medical training, automotive and three-dimensional simulation markets. Immersion and its wholly owned subsidiaries hold over 150 issued patents worldwide.

Immersion will host a conference call with live Internet broadcast on Monday, April 29, 2002, at 5:00 p.m. EDT. Immersion is scheduled to discuss operating results for the first quarter ended March 31, 2002, as well as the outlook for the second quarter 2002 and the full year 2002. A question and answer session will follow. To listen to the call, dial 888/391-0104, reservation number 19956363. To listen to the web cast, log on to the Internet at The call will be archived and available for replay until May 3, 2002, by dialing 800/633-8284, reservation number 19956363.

Statements made in this press release other than statements of historical fact are forward-looking statements, including those that reflect management's current forecast of certain aspects of Immersion's future. Forward-looking statements made in this press release are based on current information, which we have assessed but which by its nature is dynamic and subject to rapid and even abrupt changes. 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. Forward-looking statements include statements regarding anticipated profitability, anticipated improved financial results, increased demand for haptic technology products and continued commercial acceptance of Immersion products. 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, fluctuations in demand for touch-enabled products, potential increase in expenses and ability to retain key personnel.

Risks and uncertainties related to Immersion's business are further outlined in Immersion's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. These reports are filed with the Securities and Exchange Commission. These factors may not constitute all factors that could cause actual results to differ materially from those discussed in any forward-looking statement. Immersion does not undertake a duty to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

Note to Editors: Additional background information on Immersion Corporation is available through our Web Site at

Brand and product names mentioned in this press release are trademarks or registered trademarks of their respective companies or organizations.

                     Immersion Corporation
            Condensed Consolidated Statements of Operations
               (In thousands, except per share amounts)
                                                      Three Months
                                                     Ended March 31,
                                                   2002        2001
                                                  -     -
     Royalty revenue                            $  1,234    $  1,489
     Product sales                                 2,398       3,007
     Development contracts and other               1,173         865
                                                  -     -
         Total revenues                            4,805       5,361
                                                  -     -
Costs and expenses:
    Cost of product sales                          1,285       1,784
    Sales and marketing                            2,109       3,058
    Research and development                       1,703       2,053
    General and administrative                     1,978       2,060
    Amortization of intangibles and deferred
     stock compensation                              914       1,252
    Acquisition related and other charges            397          25
                                                  -     -
         Total costs and expenses                  8,386      10,232
                                                  -     -
Operating loss                                    (3,581)     (4,871)
Interest and other income (expense), net             (73)        211
                                                  -     -
Net loss                                        $ (3,654)   $ (4,660)
                                                =========   =========
Basic and diluted net loss per share            $  (0.19)   $  (0.25)
                                                  -     -
Shares used in calculating basic and diluted
 net loss per share                               19,351      18,448
                                                  -     -
                         Immersion Corporation
                 Condensed Consolidated Balance Sheets
                            (In thousands)
                                               March 31,  December 31,
                                                 2002        2001(1)
  Cash and cash equivalents                    $11,916      $10,381
  Short-term investments                             0        2,545
  Accounts receivable, net                       8,522        3,779
  Inventories                                    1,903        1,965
  Prepaid expenses and other current assets        955        1,179
                                                ---       ---
         Total current assets                   23,296       19,849
  Property and equipment, net                    2,720        2,918
  Purchased intangibles and other assets, net   11,133       12,058
  Other investments                              2,200        2,200
                                                ---       ---
         TOTAL ASSETS                          $39,349      $37,025
                                               =======      =======
  Accounts payable                             $ 1,170      $   722
  Accrued compensation                           1,129        1,158
  Other accrued liabilities                        706          626
  Deferred revenue and customer advances         5,707          914
  Current portion of long-term debt              4,737        4,541
                                                ---       ---
         Total current liabilities              13,449        7,961
  Long-term debt                                   134          250
                                                ---       ---
         Total liabilities                      13,583        8,211
STOCKHOLDERS' EQUITY                            25,766       28,814
                                                ---       ---
 STOCKHOLDERS' EQUITY                          $39,349      $37,025
                                               =======      =======
(1) Derived from the Company's annual audited financial statements.