New Product Launches

Notably, 2008 Medical revenues were executed without the benefit of new product introductions. This changes significantly in 2009, with the recent launch of three new products and more in the pipeline. This includes a new EBUS-TBNA bronchoscopy module, the first-ever haptic medical simulation for a new lung cancer diagnostic procedure (see press release); new Carotid modules for our endovascular platform that provide multimodal virtual reality training for carotid angioplasty and stenting stroke prevention measures (see press release); and a new Lap Chole 2.0 module for our LaparoscopyVR system targeted for training of gallbladder removal (see website).

Relocation to San Jose, CA

By relocating our Medical line of business to our corporate headquarters in San Jose, CA, Immersion continues to take bold steps to simplify, reduce duplication, and realize greater synergies. This move will measurably improve our business from an execution, operations, and management perspective and will result in meaningful cost savings that will positively impact our financial results starting in mid-2009 and beyond. This line of business will also no longer be known as “Immersion Medical.” Moving forward, Immersion is one company with one global brand that supports two interesting, growing lines of business: Medical and Touch.

In This Issue

First ever simulator for new lung cancer diagnostic procedure.

Immersion’s Touch line of business now encompasses our Mobility, Touch Interface Products, and Gaming groups, all under the leadership of Craig Vachon (see bio). By fully integrating our Touch solutions, we will realize functional synergies to gain simplicity, speed, and accountability.

40 Million Handsets Sold and Counting

More than 40 million mobile phones featuring Immersion’s haptic technology have now been sold worldwide, including more than 12.5 million in the fourth quarter of 2008. Licensees of Immersion’s solutions – Nokia, Samsung, and LG – are now number one, two, and three in the world market, helping to drive record revenue from this source in Q4. Immersion’s technology is integrated into the highly acclaimed Nokia 5800 XpressMusic touchscreen music phone as well as the Samsung Omnia HD and UltraTouch.

Expanding Mobile Customer Base

Immersion continues to grow its mobility base of licensees, most recently with the addition of Pantech, one of Korea’s largest mobile phone manufacturers (see press release). Pantech will use Immersion’s haptics technology in several of its premier mobile phones, with the first model expected to be launched by the end of the second quarter. In addition, Immersion is penetrating the important open-software operating system phone market with participation in the Android mobile platform (see press release) and inclusion in an upcoming Samsung Linux phone for South Korea Telecom.

Powering Samsung P3 Multimedia Player

Immersion migrates into additional handheld devices with Samsung’s new subscription-enabled digital media player, the P3 (see press release). The P3 is the first digital media player in the world to include touch feedback. The new haptic-enabled product enjoyed a highly successful debut at CES where it was deemed a CES Innovations 2009 Design and Engineering Award honoree.

"‘With every command gesture, from swiping a finger across the screen, to switching audio tracks, to holding down a digital button for fast-forwarding video, the P3 reacts with a variety of physical sensations for a more intimate user experience versus other media players." (See ZDNet’s CES 2009 review)

Fueling Haptics Innovation in the Automotive Sector

Immersion has signed a license agreement with tier-one systems integrator Visteon that will lead to future innovations for haptic-enabled controls in the automotive sector (see press release). Visteon’s booth at CES featured a car control console of the near-future with our technology embedded and brought to life. (See CNET video). Road & Track just reviewed the new 2012 Tesla Model S and highlighted its use of haptics. According to Road & Track “The icing on the cake is inside the Model S, where a huge 17-in. touch-screen infotainment system acts as the center console. It's got a haptic interface (meaning you can feel it click when you press it), with 3G wireless connectivity and is fully configurable like a mobile desktop computer.” (See Road & Track article). Immersion also announced the first-ever automotive-grade actuator to enable fast integration of advanced touch feedback into touchscreens and touch surfaces for the global automotive industry. (See press release).

“These solutions will satisfy demands for controls that provide haptics similar to what consumers are accustomed to with portable electronic devices. This is part of an ongoing trend to integrate consumer electronics and the characteristics of personal devices into the vehicle.” --Visteon Electronics Group President Steve Meszaros

Actively Engaging at the Chip Level

Immersion is making strong progress in vertically integrating our haptics technology into semiconductors, a key part of our strategy to broaden distribution and create additional segments for growth. This includes a new agreement with analog and mixed-signal semiconductor provider Leadis Technology to implement high-quality haptic feedback. (See MarketWatch story.) We have also expanded our partnership with Imagis to drive further integration of Immersion’s haptic technology into Integrated Circuits (ICs), making it easier for customers worldwide to gain the competitive advantages that haptics provides. (See press release).

Explosive growth of haptics: 40M mobile phones shipped with Immersion technology

“During the 2009 Mobile World Congress trade show, Samsung introduced a slogan for its mobile phones – ‘Touch Power!’ -- a pretty clear indicator from one of the world's largest makers of mobile phones that the future is all about touch.” (Read InformationWeek’s article)

The P3 is the first digital media player in the world to include touch feedback.

2012 Tesla Model S 17-inch infotainment system with haptic interface.

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