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Press Release

Oct 29, 2001

Immersion Corporation Reports Record Third Quarter Net Revenues of $4.5 Million, an Increase of 18% Over Q3 2000

Immersion Corporation Reports Record Third Quarter Net Revenues of $4.5 Million, an Increase of 18% Over Q3 2000 SAN JOSE, Calif., Oct 29, 2001 -- Immersion Corporation, (Nasdaq:IMMR), the pioneering developer of sensory interaction technology, announced today that third quarter 2001 total revenues were $4.5 million, as compared with $3.8 million in the third quarter of 2000, an increase of 18%. The third quarter 2001 revenue was comprised of $2.3 million in product revenue, which was $182,000 or 8% higher than the third quarter of 2000; $1.3 million in royalty revenue, which was $955,000 or 310% higher than the third quarter of 2000; and $881,000 in development contract revenue, which was $470,000 or 35% lower than the third quarter of 2000. The royalty revenue increase resulted primarily from an increase of new product offerings by our licensees during the third quarter of 2001 as compared to the third quarter of 2000. The pro forma operating loss, excluding amortization of intangibles and deferred stock compensation and acquisition related and other charges, was $3.2 million for the third quarter of 2001 or $0.17 per diluted share compared to $4.6 million for the third quarter of 2000 or $0.25 per diluted share. Net loss was $9.0 million for the third quarter of 2001 or $0.48 per diluted share compared to $8.3 million for the third quarter of 2000 or $0.46 per diluted share. Included in net loss for the third quarter of 2001 was a non-cash charge of $4.3 million as the company wrote down the value of certain investments in privately held companies made over the last two years.

Total revenues for the nine months ended September 30, 2001 increased to $14.1 million from $10.1 million for the nine months ended September 30, 2000, an increase of 40%. Total revenues for the nine months ended September 30, 2001 were comprised of $8.1 million in product sales, which was $2.9 million or 56% higher than the product sales for the nine months ended September 30, 2000; royalty revenue for the nine months ended September 30, 2001 was $3.4 million, which was $1.2 million or 57% higher than the royalty revenue for the nine months ended September 30, 2000 and development contract revenue for the nine months ended September 30, 2001 was $2.6 million, which was $113,000 or 4% lower than the development contract revenue for the nine months ended September 30, 2000. The pro forma operating loss, excluding amortization of intangibles and deferred stock compensation and acquisition related and other charges, was $10.5 million for the nine months ended September 30, 2001 or $0.56 per diluted share compared to $11.3 million for the nine months ended September 30, 2000 or $0.65 per diluted share.

"We're very pleased with our third quarter royalty revenue results and the progress we made during the quarter in our various business groups," said Bob O'Malley, Chairman and CEO at Immersion. "The Company's revenue increased 18% over the third quarter of 2000 in spite of the difficult economic conditions in the marketplace. I'm pleased with our ability to continue to manage our costs down as we move closer to profitability. Our third quarter was important to us for a number of reasons including, the success of Logitech's GT Force product, the first full-featured TouchSense gaming device for the PlayStation II platform, the expanded technology license with Mad Catz covering controllers for the PlayStation II and upcoming Xbox gaming consoles, and the unveiling by Nissan of their next generation automotive dashboard interface using TouchSense Technology, as demonstrated at the Tokyo Motor Show this weekend."

About Immersion Corporation (www.immersion.com)

Founded in 1993, Immersion Corp. develops and licenses advanced hardware and software technologies that let people use their sense of touch to better interact with the digital world around them. Immersion's haptic technology can be applied to virtually every digital experience including personal computing, entertainment, medical training, automotive interfaces, and three-dimensional simulation. Immersion's patented TouchSense(TM) technologies can dramatically improve computer users' performance and productivity by unlocking their sense of touch and allowing them to feel what they see and do on the computer screen. Immersion and its wholly owned subsidiaries hold over 100 issued patents worldwide.

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.

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.

Immersion will host a conference call with live Internet broadcast on Monday, October 29, 2001, at 5:00 p.m. EDT. Immersion is scheduled to discuss operating results for the third quarter ended September 30, 2001, as well as the fourth quarter 2001 and the full year 2002 outlook. A question and answer session will follow. To listen to the call, dial 212/346-6392, reservation number 16836332. To listen to the webcast, log on to the Internet at http://www.immersion.com. The call will be archived and available for replay until November 2, 2001, by dialing 800/633-8284, reservation number 16836332.

Note to Editors: Additional background information on Immersion Corporation is available through our Web Site at http://www.immersion.com.

                      Immersion Corporation
            Condensed Consolidated Statements of Operations
               (In thousands, except per share amounts)
                              (Unaudited)
                                 Three Months Ended  Nine Months Ended
                                     September 30,      September 30,
                                    2001     2000      2001      2000
                                   ---   ---    ---    ---
Revenues:
 Royalty revenue                  $1,263   $  308    $3,385    $2,158
 Product sales                     2,327    2,145     8,073     5,171
 Development contracts and other     881    1,351     2,610     2,723
                                   ---   ---    ---    ---
    Total revenues                 4,471    3,804    14,068    10,052
                                   ---   ---    ---    ---
Costs and expenses:
 Cost of product sales             1,421    1,150     4,801     2,807
 Sales and marketing               2,303    2,905     7,929     7,703
 Research and development          1,791    1,871     5,920     4,966
 General and administrative        2,116    2,435     5,917     5,881
 Amortization of intangibles
  and deferred stock compensation  1,301    1,590     3,953     3,460
 Acquisition related
  and other charges                  100    2,582       225     3,469
                                   ---   ---    ---    ---
    Total costs and expenses       9,032   12,533    28,745    28,286
                                   ---   ---    ---    ---
Operating loss                    (4,561)  (8,729)  (14,677)  (18,234)
Interest and other
 income (expense), net            (4,477)     380    (4,101)    1,447
                                   ---   ---    ---    ---
Net loss                         $(9,038) $(8,349) $(18,778) $(16,787)
                                  =======  =======   =======   =======
Basic and diluted
 net loss per share              $ (0.48) $ (0.46) $  (1.01) $  (0.96)
                                   ---   ---    ---    ---
Shares used in calculating basic
 and diluted net loss per share   18,785   17,955    18,616    17,509
                                   ---   ---    ---    ---
                         Immersion Corporation
                 Condensed Consolidated Balance Sheets
                            (In thousands)
                                           September 30,  December 31,
                                                2001         2000(1)
                                            (Unaudited)
                                              -    -
ASSETS
 Cash and cash equivalents                   $ 13,424       $ 23,474
 Short-term investments                            --          2,360
 Accounts receivable, net                       5,217          3,675
 Inventories                                    2,020          1,709
 Prepaid expenses and other current assets        680          1,306
                                               -        -
    Total current assets                       21,341         32,524
 Property and equipment, net                    3,178          3,606
 Purchased intangibles and other assets, net   12,842         14,864
 Other investments                              2,200          6,500
                                               -        -
    TOTAL ASSETS                             $ 39,561       $ 57,494
                                             =========      =========
LIABILITIES
 Accounts payable                            $  1,268       $  1,720
 Accrued compensation                             975          1,042
 Other accrued liabilities                      1,011          1,145
 Deferred revenue and customer advances           559            932
 Current portion of long-term debt              3,934            120
                                               -        -
    Total current liabilities                   7,747          4,959
 Long-term debt                                   617          4,192
                                               -        -
    Total liabilities                           8,364          9,151
STOCKHOLDERS' EQUITY                           31,197         48,343
                                               -        -
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY     $ 39,561       $ 57,494
                                             =========      =========
(1) Derived from the Company's annual audited financial statements.