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Press Release

Jul 29, 2002

Immersion Corporation Reports Second Quarter 2002 Financial Results

Immersion Corporation Reports Second Quarter 2002 Financial Results SAN JOSE, Calif., Jul 29, 2002 -- Immersion Corp., (Nasdaq:IMMR), a leading developer and licensor of haptic feedback technology, today announced that second quarter 2002 revenues were a record $5.5 million, a 29 percent increase over the $4.2 million in revenues for the second quarter of 2001. This growth was driven primarily by a 158 percent rise in higher-margin royalty revenues resulting from both the addition of new licensees and increased shipments of licensees' products during the quarter ended June 30, 2002.

Net loss was $2.1 million for the second quarter of 2002, or $0.10 per share, compared to a net loss of $5.1 million for the second quarter of 2001, or $0.27 per share. The company's net loss narrowed as a result of the company's prudent expense management that reduced operating expenses by 18 percent year-over-year and the growth in higher-margin royalty revenues. 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 $1.4 million for the second quarter of 2002, or $0.07 per share, compared to a net loss on a pro forma basis of $3.6 million for the second quarter of 2001, or $0.19 per share.

For the first six months of fiscal 2002, revenues were $10.3 million, an increase of 7 percent over revenues of $9.6 million for the first six months of fiscal 2001. Net loss for the six months ended June 30, 2002 was $5.7 million, or $0.29 per share, compared to the net loss of $9.7 million, or $0.53 per share, for the six months ended June 30, 2001. The pro forma net loss was $3.7 million, or $0.19 per share, for the six months ended June 30, 2002 as compared to the pro forma net loss of $7.0 million, or $0.38 per share, for the same period a year ago.

"In spite of a challenging economic environment, each of our business segments delivered solid contributions," said Bob O'Malley, Chairman and Chief Executive Officer of Immersion. "New licensing agreements signed during the quarter with Siemens/VDO in the automotive area, Intec in the computer gaming area, and Simbionix in the medical area increased our higher-margin royalty revenues. We are also pleased with the performance of our medical simulation business, where revenues increased 52 percent over the first quarter of 2002."

Vic Viegas, President, Chief Operating Officer and Chief Financial Officer, said, "Growth in our royalty-based business led to an improvement of our gross margins to 73 percent in the quarter, a significant increase from gross margins of 62 percent in the same quarter last year. In addition, during the quarter we increased our cash position by $3.5 million to more than $15 million."

Viegas added, "As a result of the current economic environment, we are lowering our revenue and EPS guidance for the third quarter and full-year 2002. For the third quarter of 2002, we project revenues to be in the $6 million to $6.3 million range, GAAP EPS to be between ($0.10) to ($0.12), and pro forma EPS to be between ($0.07) and ($0.09). Full-year 2002 revenues are projected to be between $23 million and $25 million, GAAP EPS to be between ($0.43) and ($0.48), and pro forma EPS to be between ($0.25) and ($0.30). In spite of the lower revenue outlook, we believe that our expense management discipline will keep us on track to become cash flow positive by the fourth quarter of 2002."

About Immersion Corporation (www.immersion.com)

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 170 issued patents worldwide.

Immersion will host a conference call with live Internet broadcast on Monday, July 29, 2002, at 5:00 p.m. EDT. Immersion is scheduled to discuss operating results for the second quarter ended June 30, 2002, as well as the outlook for the third 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 19956364. To listen to the web cast, log on to the Internet at http://www.immersion.com. The call will be archived and available for replay until August 2, 2002, by dialing (800) 633-8284, reservation number 19956364.

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

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 or anticipated improved financial results. 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.

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)
                              (Unaudited)
                               Three Months           Six Months
                               Ended June 30,        Ended June 30,
                              2002       2001       2002       2001
                                             
Revenues:
 Royalty revenue            $  1,633   $    633   $  2,867   $  2,122
 Product sales                 2,821      2,739      5,219      5,746
 Development contracts
  and other                    1,007        864      2,180      1,729
                                             
    Total revenues             5,461      4,236     10,266      9,597
                                             
Costs and expenses:
 Cost of product sales         1,479      1,596      2,764      3,380
 Sales and marketing           1,817      2,568      3,926      5,626
 Research and development      1,588      2,076      3,291      4,129
 General and administrative    1,813      1,741      3,791      3,801
 Amortization of intangibles
  and deferred stock
  compensation                   712      1,400      1,626      2,652
 Acquisition related and
  other charges                  --         100        397        125
                                             
    Total costs and expenses   7,409      9,481     15,795     19,713
                                             
Operating loss                (1,948)    (5,245)    (5,529)   (10,116)
Interest and other income
 (expense), net                 (123)       165       (196)       376
                                             
Net loss                    $ (2,071)  $ (5,080)  $ (5,725)  $ (9,740)
                            ========   ========   ========   ========
Basic and diluted net
 loss per share             $  (0.10)  $  (0.27)  $  (0.29)  $  (0.53)
                                             
Shares used in calculating
 basic and diluted net
 loss per share               20,002     18,611     19,679     18,530
                                             
                         Immersion Corporation
                 Condensed Consolidated Balance Sheets
                            (In thousands)
                                          June 30,      December 31,
                                            2002          2001 (1)
                                        (Unaudited)      (Audited)
ASSETS
 Cash and cash equivalents                $ 15,378        $ 10,381
 Short-term investments                        --            2,545
 Accounts receivable, net                    3,891           3,779
 Inventories                                 2,034           1,965
 Prepaid expenses and other
  current assets                               679           1,179
                                                      
    Total current assets                    21,982          19,849
 Property and equipment, net                 2,509           2,918
 Purchased intangibles and other
  assets, net                               10,869          12,058
 Other investments                           2,200           2,200
                                                      
    TOTAL ASSETS                          $ 37,560        $ 37,025
                                          ========        ========
LIABILITIES
 Accounts payable                         $  1,250        $    722
 Accrued compensation                          906           1,158
 Other accrued liabilities                     764             587
 Deferred revenue and customer advances        905             953
 Current portion of long-term debt           4,931           4,541
                                                      
    Total current liabilities                8,756           7,961
 Long-term debt                                 72             250
 Long-term portion of deferred revenue       4,625             --
                                                      
    Total liabilities                       13,453           8,211
STOCKHOLDERS' EQUITY                        24,107          28,814
                                                      
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY  $ 37,560        $ 37,025
                                          ========        ========
(1) Derived from the Company's annual audited financial statements.