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As an investor, you have a unique opportunity to get behind a technology that is just beginning to reach its full potential. Just as touch input changed the way that billions of devices receive input from humans, touch feedback will change the way devices convey information back to us.  From mobile phones to wearables, game consoles to automobiles, haptic feedback is enriching the way that people interact with digital technology.  And the best is yet to come as content on mobile, video, games and social networks, become richer, more realistic and more personal with haptics.  At Immersion, we’re changing the digital world.

Oct 28, 2002

Immersion Corporation Reports Third Quarter 2002 Financial Results

Immersion Corporation Reports Third Quarter 2002 Financial Results SAN JOSE, Calif., Oct 28, 2002 -- Immersion Corporation, (Nasdaq:IMMR), a leading developer and licensor of haptic feedback technology, today announced that third quarter 2002 revenues were $4.5 million, flat with revenues from the third quarter of 2001. The lack of quarterly growth is due primarily to lower than expected chip sales as well as delays in deliveries of high-end products, especially in the 3D area, related to weak economic conditions and budgetary constraints currently being faced by customers of Immersion's high value products.

Net loss for the third quarter of 2002 was $4.4 million, or $0.22, per share, including a non cash charge of $1.2 million related to a write-down of an equity investment in a privately-held company, compared to a net loss of $9.0 million, or $0.48 per share, for the third quarter of 2001, which included a non cash charge of $4.5 million related to a write-down of equity investments in two privately-held companies. The net loss narrowed as a result of the Company's expense management that reduced operating expenses by 16 percent year-over-year. 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 $3.7 million, or $0.18 per share, for the third quarter of 2002 compared to a net loss on a pro forma basis of $7.6 million, or $0.41 per share, for the third quarter of 2001.

For the first nine months of fiscal 2002, revenues were $14.7 million, 5 percent higher than revenues of $14.1 million for the first nine months of fiscal 2001. Net loss for the nine months ended September 30, 2002 was $10.2 million, or $0.51 per share, compared to the net loss of $18.8 million, or $1.01 per share, for the nine months ended September 30, 2001. The pro forma net loss for the nine months ended September 30, 2002 was $7.4 million, or $0.37 per share, as compared to the pro forma net loss of $14.6 million, or $0.78 per share, for the same period a year ago.

"We have seen significant delays in customer purchasing decisions, especially in our high end products," said Vic Viegas, Immersion's new CEO. "While the weak economy curtailed spending by our customers and delayed shipments by some of our licensees contributed to the significant shortfall in revenue, we are disappointed in our revenue results for the third quarter. The company has instituted changes in management to address our performance."

Viegas added, "We project revenues to be in the $5.5 million to $6.0 million range for the fourth quarter of 2002, GAAP EPS to be between ($0.11) to ($0.13), and pro forma EPS to be between ($0.07) and ($0.09). Full-year 2003 revenues are projected to be between $25 million and $27 million, GAAP EPS to be between ($0.34) and ($0.41), and pro forma EPS to be between ($0.19) and ($0.26)."

About Immersion Corporation (www.immersion.com)

Founded in 1993, Immersion Corporation 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 180 issued patents worldwide.

Immersion will host a conference call with live Internet broadcast on Monday, October 28, 2002, at 5:00 p.m. EST. Immersion is scheduled to discuss operating results for the third quarter ended September 30, 2002, as well as the outlook for the fourth quarter 2002 and the full year 2003. A question and answer session will follow. To listen to the call, dial 888/391-0104, reservation number 19956365. 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 November 1, 2002, by dialing 800/633-8284, reservation number 19956365.

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 Immersion's future prospects. Forward-looking statements made in this press release are based on current information, which management has assessed but which by its nature is dynamic and subject to rapid and even abrupt changes. Forward-looking statements include statements relating to Immersion's future revenue and operating results, purchasing decisions by Immersion's customers, and the positioning of Immersion in anticipation of future strength and growth. 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 is not obligated 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          Nine Months
                             Ended September 30,   Ended September 30,
                               2002       2001       2002       2001
                                              
Revenues:
 Royalty revenue             $   878   $  1,263   $  3,745   $  3,385
 Product sales                 2,612      2,327      7,831      8,073
 Development contracts and
  other                          987        881      3,167      2,610
                                              
   Total revenues              4,477      4,471     14,743     14,068
                                              
Costs and expenses:
 Cost of product sales         1,623      1,421      4,387      4,801
 Sales and marketing           1,607      2,303      5,533      7,929
 Research and development      1,557      1,791      4,848      5,920
 General and administrative    2,062      2,116      5,853      5,917
 Amortization of intangibles
  and deferred stock
  compensation                   748      1,301      2,374      3,953
 Acquisition related and
  other charges                   --        100        397        225
                                              
   Total costs and expenses    7,597      9,032     23,392     28,745
                                              
Operating loss                (3,120)    (4,561)    (8,649)   (14,677)
Interest and other income
 (expense), net               (1,312)    (4,477)    (1,508)    (4,101)
                                              
Net loss                     $(4,432)  $ (9,038)  $(10,157)  $(18,778)
                             ========   ========   ========   ========
Basic and diluted net loss
 per share                   $ (0.22)  $  (0.48)  $  (0.51)  $  (1.01)
                                              
Shares used in calculating
 basic and diluted net
 loss per share               20,113     18,785     19,825     18,616
                                              
                         Immersion Corporation
                 Condensed Consolidated Balance Sheets
                            (In thousands)
                                          September 30,   December 31,
                                             2002           2001 (1)
                                          (Unaudited)      (Audited)
                                            ---        --
ASSETS
  Cash and cash equivalents                $ 8,686          $10,381
  Short-term investments                        --            2,545
  Accounts receivable, net                   3,880            3,779
  Inventories                                2,353            1,965
  Prepaid expenses and other current
   assets                                      435            1,179
                                            ---        --
         Total current assets               15,354           19,849
  Property and equipment, net                2,305            2,918
  Purchased intangibles and other
   assets, net                              10,594           12,058
  Other investments                          1,000            2,200
                                            ---        --
         TOTAL ASSETS                      $29,253          $37,025
                                          ===========      ==========
LIABILITIES
  Accounts payable                         $   840          $   722
  Accrued compensation                         773            1,158
  Other accrued liabilities                  1,353              587
  Deferred revenue and customer
   advances                                  1,034              953
  Current portion of long-term debt            622            4,541
                                            ---        --
         Total current liabilities           4,622            7,961
  Long-term debt                                58              250
  Long-term portion of deferred
   revenue                                   4,542               --
                                            ---        --
         Total liabilities                   9,222            8,211
STOCKHOLDERS' EQUITY                        20,031           28,814
                                            ---        --
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY                       $29,253          $37,025
                                          ===========      ==========
(1) Derived from the Company's annual audited financial statements.