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Immersion Corp. Reports Operating Results (10-Q)

February 08, 2010 | About:

10qk

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Immersion Corp. (IMMR) filed Quarterly Report for the period ended 2009-06-30.

Immersion Corp. has a market cap of $131.4 million; its shares were traded at around $4.7 with and P/S ratio of 3.6.

Highlight of Business Operations:

useful lives, generally 10 years. Future changes in the estimated useful life could affect the amount of future period amortization expense that we will incur. During the six months ended June 30, 2009, we capitalized costs associated with patents and trademarks $1.3 million. Our total amortization expense for the three and six months ended June 30, 2009 for all intangible assets was $224,000 and $438,000, respectively.

We had a 12% decrease in revenues from continuing operations during the second quarter of 2009 as compared to the second quarter of 2008. The second quarter revenue decline was primarily due to a 26% decrease in product sales, mainly medical product sales, and a 53% decrease in development contract revenues. We believe that the current economic downturn has had a negative effect on capital purchases of our products. The revenue decrease was partially offset by a 13% increase in royalty and license revenues from increased Touch royalty and license fees mainly from customers that sell mobile devices. We had a 2% decrease in revenues from continuing operations during the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. The first six months revenue decline was primarily due to a 48% decrease in development contract revenues and a 4% decrease in product sales, mainly medical product sales. The revenue decrease was partially offset by an 11% increase in royalty and license revenues from increased Touch royalty and license fees mainly from customers that sell mobile devices. In conjunction with moving our medical operating segment to San Jose and other workforce reductions in our Touch segment, we had restructuring costs of $705,000 and $1.4 million for the three and six months ended June 30, 2009, respectively. We had physical inventory write offs of $543,000 and $554,000 for the three and six months ended June 30, 2009 primarily consisting of physical count to book adjustments of medical demo equipment. We also recognized write offs of demo equipment of $668,000 and $666,000 for the three and six months ended June 30, 2009, respectively, resulting from a reconciliation of the fixed asset records to the physical inventory at the time of the move. We divested our 3D product line and recorded gains of $166,000 and $401,000 from discontinued operations for the three and six months ended June 30, 2009, respectively. This was compared to gains of $210,000 and $536,000 for the three and six months ended June 30, 2008, respectively. We also had gains on sales of discontinued operations of $20,000 and $187,000 for the three and six months ended June 30, 2009, respectively. Our net loss was $8.9 million for the second quarter of 2009 compared to a net loss of $3.4 million for the second quarter of 2008. Our net loss was $15.0 million for the six months ended June 30, 2009 compared to a net loss of $6.6 million for the six months ended June 30, 2008.

Based on our litigation conclusion and new business agreement entered into with Sony Computer Entertainment in March 2007, we are recognizing a minimum of $30.0 million as royalty and license revenue from March 2007 through March 2017, approximately $750,000 per quarter. The revenue from our third-party peripheral licensees included in royalty and license revenue has also generally continued to decline primarily due to i) the reduced sales of past generation video console systems due to the launches of the next-generation console models from Microsoft Xbox 360, Sony PlayStation 3 (PS3), and Nintendo Wii, and ii) the decline in third-party market share of aftermarket game console controllers due to the launch of next-generation peripherals by manufacturers of console systems.

Development contract and other revenue Development contract and other revenue is comprised of revenue on commercial contracts and extended support contracts. Development contract and other revenue was $330,000 during the second quarter of 2009, a decrease of $374,000 or 53% as compared to the second quarter of 2008. The decrease was mainly attributable to a decrease in medical contract revenue due to the completion of work performed under medical contracts that occurred through the first six months of 2008. We do not currently have any government projects in development. We continue to transition our engineering resources from certain commercial development contract efforts to product development efforts that focus on leveraging our existing sales and channel distribution capabilities.

Royalty and license revenue Royalty and license revenue is comprised of royalties earned on sales by our TouchSense licensees and license fees charged for our intellectual property portfolio. Royalty and license revenue for the six months ended June 30, 2009 was $7.4 million, an increase of $729,000 or 11% from the six months ended June 30, 2008. The increase in royalty and license revenue was primarily due to an increase in royalty and license revenue from our Touch segment from increased shipments by licensees of mobile devices partially offset by decreased shipments by gaming and automotive licensees.

Development contract and other revenue Development contract and other revenue is comprised of revenue on commercial contracts and extended support contracts. Development contract and other revenue was $776,000 during the six months ended June 30, 2009, a decrease of $727,000 or 48% as compared to the six months ended June 30, 2008. The decrease was mainly attributable to a decrease in medical contract revenue due to the completion of work performed under medical contracts that occurred through the first six months of 2008. Partially offsetting that decrease was increased revenue recognized on Touch development contracts and support.

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