Immersion Corp (IMMR) 2004 Q3 法說會逐字稿

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  • Operator

  • Good afternoon. At this time, I would like to welcome everyone to the Immersion Corporation Quarterly Results Conference Call.

  • (OPERATOR INSTRUCTIONS.)

  • Mr. Viegas, you may begin your conference.

  • Victor Viegas - President and CEO and COO and CFO

  • Thank you, Meredith.

  • Good afternoon, ladies and gentlemen. I am pleased to welcome you to this discussion of Immersion's results for the third quarter of 2004. Joining me on today's call is Immersion's Vice President and Corporate Controller, Mary Beth Faust (ph), who will take you through our financials.

  • By now you should have seen this quarter's earnings release that was distributed following the close of market today. If you have not, it is available on our website at www.immersion.com. A replay of today's call may be accessed until October 29th, 2004, by dialing 800-642-1687, and entering reservation number 4572190. A replay of this call will also be archived and available on our website for one year.

  • During the course of our comments today, we will be making forward-looking statements. Our actual results could differ materially from these current expectations. Factors that could cause actual results or developments to differ include risk factors listed in today's news release, in the Company's SEC filings, and in our Annual Report to Shareholders, as well as those factors mentioned during our discussion today.

  • Before getting into the details of our performance this quarter, I'd like to make a few remarks about the Company and where we are in our mission to build a highly profitable company. Immersion is built on a strong foundation of innovative technology and intellectual property. An example of the strength of our technology portfolio, and our ability to defend it, is the recent Sony trial verdict that held the asserted 16 claims and 2 of our patents were valid and infringed. We now own more than 240 patents in our worldwide intellectual property portfolio, with more than 280 pending applications.

  • Our technological expertise allows us to design and manufacture high-quality products that have exceptional market appeal, shown most notably this quarter by our medical simulation products. We will continue to be a very strong technical organization, developing technology and product solutions for our customers, while vigorously defending our intellectual property for the benefit of our shareholders.

  • Over the last year, I have retooled the Immersion organization, adding significant strength to the sales and marketing functions to more effectively bring our technology and products to market. These organizational changes include adding significantly increased industry experience to the medical and mobility businesses; increased product marketing skills; better geographical sales coverage; and increased technical support for our sales teams in all of our businesses.

  • The earliest results of these investments can be seen in our medical business, with a very large increase in product sales. Upon this strong technology and human resources foundation, we have built an entirely new and very exciting business in the mobility market.

  • I am very happy to announce today that our mobility business has reached a milestone with the launch of our new product, the VibeTonz System. Behind the scenes in 2004 we have been busy finishing the products, introducing the technology, and building relationships in the industry. The first public sign of our success in the mobility market will be a mobile phone with our technology that is expected to be launched this quarter.

  • During today's call, I will be discussing five major highlights of the third quarter. The first is, overall, Immersion's third quarter revenues grew 34 percent year-over-year. Second, our medical businesses grew 95 percent year-over-year, led by strong product sales. Third, even with market sales of PC and console gaming peripherals substantially down, our gaming revenue increased 36 percent year-over-year. Fourth, in the mobility area, yesterday we announced an agreement with QUALCOMM and the launch of our VibeTonz system. These announcements demonstrate our success at establishing an initial ecosystem of operators, handset manufacturers, and content developers. And fifth, the patent infringement case against Sony went to trial in August and, in September, the jury returned a verdict favorable to Immersion, including awarding Immersion damages in the amount of $82 million.

  • Before turning the call over to Mary Beth for a detailed review of financials, I will discuss high-level financial results and give you an update on our businesses and the status of our litigation with Sony.

  • Beginning with our financial performance, the third quarter revenue of $5.5 million represents 34 percent year-over-year growth. A look at our balance sheet shows that we finished the third quarter with $11.9 million in cash. Due to the Sony trial, litigation expenses in the third quarter were $3.8 million, bringing the total cost of the Microsoft and Sony litigation since February, 2002, when we filed the lawsuit, to approximately $18 million.

  • Our non-litigation-related cash consumption for the quarter was $2.5 million. With lower legal fees and the seasonal increase in gaming revenues, we expect cash consumption to be down in the fourth quarter.

  • I'd now like to give you an update on our businesses. Overall revenue for the medical business was $2.7 million, which is a 95 percent increase over third quarter last year. This quarter, medical product sales increased 30 percent sequentially and more than doubled year-over-year.

  • Product sales across all of our medical simulators are strong. We expect demand for our medical products will continue to grow due to several factors, including one, increased market awareness and acceptance of medical simulation; two, use of the recently completed return-on-investment study for medical simulators, as well as positive clinical studies published in leading medical journals that I described in the last quarterly conference call; and three, our refocused sales and marketing strategy.

  • Turning now to our gaming business, this quarter revenue was up 36 percent from last year's third quarter revenues. This growth was driven by an increase in licensing royalties from the sales of both console and PC gaming peripherals by our licensees. We expect a seasonal up-tick in royalty revenue during the fourth quarter of this year, due to increases in our licensee's sales of game controllers and other licensed products during the holiday season.

  • In the automotive market, we are focusing on applications for our rotary and haptic touch-screen technologies. Automotive licensing revenue continues to grow, and we currently have development projects for several OEMs and Tier One suppliers.

  • Turning to the mobility business, our success in the mobility market depends on establishing multiple ecosystems, which consist of an operator, handset manufacturers, and content developers. To this end, we have made significant progress in establishing our initial ecosystem around a handset from Samsung. We expect this first handset to be released by a major operator before the end of the year.

  • In addition, we are formally launching our products for the mobility market at CTIA Wireless IT and Entertainment 2004, being held today through Wednesday of this week at the Moscone Center in San Francisco. Our booth includes demonstrations of our technology and developer tools for industry participants and the press. We issued three press releases that provide more detail on our product called the VibeTonz System, and described an important agreement with QUALCOMM.

  • Last night, we highlighted these releases at a press event held in conjunction with the show. I would like to discuss a few important points in the announcements.

  • The VibeTonz System includes a complete software developer kit to create touch effects, called VibeTonz Studio SDK, and an effect player called VibeTonz Mobile, which is embedded in the mobile handset. Using the VibeTonz system, everyone in the ecosystem can increase revenue and enhance new and existing content or services.

  • This VibeTonz-enabled content could include downloadable ring tones, games, messaging, alerts, email, music, user interface features, and most of the next wave of web-based mobile applications. Content developers can purchase the VibeTonz Studio Software Developer Kit and begin developing content enhanced by VibeTonz's technology. Our VibeTonz Mobile Player can be embedded on virtually any mobile phone to produce realistic touch sensations.

  • As background for the QUALCOMM announcement, QUALCOMM's Binary Runtime Environment for Wireless Systems, knows as BREW, is an application platform which, when combined with the BREW Distribution System, connects the mobile marketplace value chain. The BREW system enables publishers, developers, operators, and handset manufacturers to create and deliver new wireless data products and services, with minimal resources and capital investments.

  • The BREW distribution system allows for secure, over-the-air distribution of applications to subscribers' devices, and coordinates billing and payment. Publishers and developers worldwide are generating revenue from thousands of BREW-based applications and content. Twenty-seven manufacturers have offered more than 150 BREW-enabled device models to consumers around the world, through 37 major operators.

  • Yesterday, Immersion announced an agreement with QUALCOMM whereby QUALCOMM will distribute an Immersion-developed VibeTonz extension for its BREW system for mobile phones with CDMA technology. Developers worldwide will have access to the new VibeTonz extension through the BREW distribution system, allowing them to rapidly deploy VibeTonz technology in their applications. Consumers with CDMA handsets with our VibeTonz technology and BREW will be able to seamlessly download VibeTonz applications for their enjoyment.

  • In addition, we announced that Immersion has been accepted as an Elite-level member in the BREW Developer Alliance Program. The Elite member status means that QUALCOMM will work with Immersion to introduce the VibeTonz system to its content developers, operators, and handset manufacturers worldwide. We are very encouraged by the mobility market opportunity, and continue to view this area as one of the next growth catalysts for Immersion.

  • Now, let me update you on subsequent events relating to the Sony litigation. We announced on September 21st that the jury returned a verdict favorable to Immersion in our patent infringement suit against Sony Computer Entertainment, Inc. and Sony Computer Entertainment of America, Inc., both referred to here as Sony. The jury found that Sony infringed all the asserted claims, 16 in total, of U.S. Patent Numbers 6275213, and 6424333, and that those claims were valid. The jury also awarded Immersion damages in the amount of $82 million. A judgment has not yet been entered.

  • On September 22nd we held a conference call to discuss the verdict. For more details you may listen to the webcast of the call archived on our website, or refer to the transcript of that conference call, filed as an 8-K with the Securities and Exchange Commission, also available on Immersion's website.

  • As is to be expected following a trial, both Immersion and Sony have filed papers with the court since the verdict was announced. To date, Immersion has filed post-trial motions requesting, one, that the court enter a judgment on the jury's verdict and a permanent injunction against further acts of infringement, including the sale of the infringing Sony product in the United States. A hearing before the court on Immersion's request for judgment, and an injunction, is currently scheduled for November 19th. After a judgment has been entered, we expect the case will be appealed to the U.S. Court of Appeals for the Federal Circuit.

  • Number two, that the court award Immersion, in amounts to be determined, A, supplemental damages for additional infringing sales made after June 30th, 2004, through the date of judgment, June 30th being the date through which both parties' experts calculated damages at trial; B, prejudgment interest on the jury's damage award; and C, Immersion's cost of suit, including certain items allowed by law, which do not include attorney's fees. Motions requesting that the court determine if this case is an exceptional case, in which case the court can award legal fees, have not yet been filed.

  • And number three, that the court direct Sony to provide in writing its evidence relating to its remaining allegations that the 3-3-3 patent is not enforceable because of an alleged failure to provide the Patent Office with certain information during the prosecution of that patent. The court has not yet set procedures for the resolution of this narrow issue, but we expect that the court will do so shortly.

  • During the trial, both Sony and Immersion filed motions arguing that the court enter judgment as a matter of law in their favor on certain points. These motions remain pending. On October 1st, 2004, the court issued an order stating that these motions will be taken under submission on the papers. Opposition briefs were filed October 15th and reply briefs were filed on October 22nd.

  • On October 20th, 2004, Internet Services, LLC, an Immersion licensee, filed a claim against Immersion in the Sony lawsuit alleging that ISLLC is entitled to a portion of the judgment Immersion obtained against Sony. ISLLC also has filed a claim against Sony alleging infringement of the 2-1-3 and the 3-3-3 patents with respect to M-Rated video games that were among the products in the Sony lawsuit. We strongly dispute ISLLC's contentions and will respond appropriately through our counsel in the proceedings. Immersion also expects that additional motions will be filed with the court on the matters I have outlined, and other related issues.

  • In a related matter, Immersion filed a lawsuit on September 24th, 2004, in the U.S. District Court for the Northern District of California, against ElectroSource, LLC, which sells and distributes video game controllers under the Pelican brand. The lawsuit alleges that ElectroSource infringes the same two patents held valid in the lawsuit against Sony.

  • On October 14th, 2004, ElectroSource answered the complaint and counterclaimed against Immersion for a judicial declaration that the patents are invalid, or not infringed. This lawsuit also is before Judge Wilken as a related case to the Sony litigation. A case management conference currently is scheduled for January 28th, 2005. This action against ElectroSource was necessary to protect our intellectual property, which we will do across all of our businesses.

  • With that, I'd now like to turn the call over to Mary Beth, who will review our financial performance for the quarter. Mary Beth?

  • Mary Beth Faust - VP and Corporate Controller

  • Thanks, Vic. Let me begin by briefly reviewing the revenue results of each of our businesses.

  • Revenue from our medical business in the third quarter of 2004 was $2.7 million, a 95 percent increase over the comparable quarter in 2003. Our industrial group, which includes our automotive business, as well as our 3D and professional businesses, revenue from our industrial group decreased 11 percent on a year-over-year comparison, due largely to lower government contract revenue, and lower development contract revenue in automotive. Revenue from gaming grew 36 percent year-over-year, driven by increased royalty and licensing revenue from our licensees on both PC and console gaming peripheral products.

  • Turning now to the income statement. As stated in today's earnings release, revenues for the third quarter of 2004 were $5.5 million, compared to $4.1 million in the third quarter of 2003, a 34 percent increase. Royalties from patent and license -- excuse me. Royalties from patent and technology licensing in the third quarter of this year represented 28 percent of total revenue, or $1.5 million, versus $905,000 for the same quarter last year.

  • Product sales, due to the strength in medical, accounted for 60 percent of total revenue at $3.3 million, compared to $2.1 million in the third quarter a year ago. Development contract revenue for the quarter represented 12 percent of total revenue, or $653,000, compared to $1.1 million in the third quarter of 2003.

  • On a GAAP basis, net loss was $6.9 million, or $0.29 per share, compared to a net loss of $5.2 million, or $0.26 per share for the third quarter of 2003. Third quarter 2004 operating expenses were $10.2 million, compared to $7.1 million in the third quarter of 2003. The higher operating expenses are related to increased legal expenses associated with the Sony trial, increased investment in sales and marketing, and increased public company expenses, such as the cost of compliance with the Sarbanes-Oxley Act of 2002.

  • Gross margins were 67 percent in the third quarter of 2004, compared to 71 percent for the third quarter of 2003, due to product sales being a more significant element in the revenue mix than licensing and royalty, or development contract revenue.

  • Shares outstanding at the end of the third quarter were 23.3 million, as compared to 20.4 million at the end of the third quarter a year ago. The increase in the number of shares outstanding was largely due to Microsoft's conversion of Immersion Series A Redeemable Convertible Preferred Stock into Immersion Common Stock. This conversion was a very positive event for Immersion because it eliminated certain obligations, such as the mandatory redemption buy-back provision, the obligation to make dividend payments, and certain operational limitations.

  • On our balance sheet of September 30th, 2004, we had cash and cash equivalents totaling $11.9 million, as compared to $18.2 million at the end of the June 2004 quarter. The third quarter loss of $6.9 million included non-cash charges of $600,000.

  • This concludes the review of our financial results, and I will now turn the call back over to Vic.

  • Victor Viegas - President and CEO and COO and CFO

  • Thanks, Mary Beth. Before taking your questions, let me close by saying that we are building a solid foundation, including products, technology and people for making all of our businesses strong. We're experiencing very good growth in several areas, and have successfully launched an entirely new business with exciting new growth potential in the mobility market. While we are disappointed in the market's current assessment of our valuation, we are not allowing that factor to slow down our mission to achieve revenue growth and profitability.

  • Meredith, please open the call for questions.

  • Operator

  • (OPERATOR INSTRUCTIONS.)

  • John Donahue (ph), Private Investor.

  • John Donahue - Private Investor

  • Victor, I was out for the shareholder meeting. Just want to congratulate you on the recent success. I was hoping that you could give us a little insight into the mobility additions, you know, to -- in sales and marketing. That's a tremendous announcement today, with the QUALCOMM agreement and I would expect that the whole mobility world would be looking to the technology. So, I was just wondering if you were planning on adding additional bodies in sales and marketing in mobility? Thank you.

  • Victor Viegas - President and CEO and COO and CFO

  • Sure, John. A good question. Thank you. We obviously believe that the rollout of our products is very important. The partnership with QUALCOMM and the announcement are quite significant, just simply given the size, and the breadth and depth of their technology and its adoption.

  • I think I mentioned a few statistics, but just a few more. There's 180 million worldwide BREW application downloads, over 38 million BREW devices in the market. So, they obviously have a very substantial business and this announcement is very important to Immersion.

  • Over the last 6 to 12 months, we have increased the industry experience. We have a number of key people involved in the business, starting with John Grundy at the top, who previously had worked at Nokia, comes from the industry, and is leading the mobility team. Behind John we have Jeff Eid, who is running the sales group worldwide. And Jeff has been at the forefront of our mobility activities for over -- over a year and a half, almost two years now. And behind them, we have product marketing capabilities and many other types of supporting positions that we've been filling recently.

  • In addition, we're looking to extend our sales reach geographically beyond just the basic U.S. market, but looking also into the European market, where we've shown some real -- seen some serious interest and a lot of activity. We're beginning to invest in resources for the European market, as well as the Asian market. So, yes, we're -- we're adding resources.

  • I am happy to say that we're adding these resources, not simply by hiring a lot of new people, but we're taking and repurposing some of the positions within the company. So, all of this investment in our sales and marketing area has come with only the increase in headcount of 12 over the last almost two years now. If you look at the headcount at the end of 2002, we had, I believe, 128 people in Immersion. Today, we have about 140. So we are -- when I said retool, I really meant we are moving some positions around and adding great depth into this mobility market.

  • John Donahue - Private Investor

  • If I may, the GSM world, are we talking in that world today?

  • Victor Viegas - President and CEO and COO and CFO

  • We -- I think we had mentioned at the last conference call we have had numerous discussions and have NDAs in place, and development efforts underway with many of the top ten OEMs and top ten operators around the world. The GSM is one space that, yes, we are aware of and actively engaged in working on solutions. It's clearly a large market, the largest market in the world. And so CDMA, while it represents about 13 percent of today's market, we expect to see it continue to grow. But, the GSM market is one that we expect to go after in the very near future as well.

  • Operator

  • Robert Katz (ph), (indiscernible).

  • Robert Katz

  • I have a question on the mobile market as well. What type of revenue per handset -- or should we be thinking about -- or how should we think about this model for that market?

  • Victor Viegas - President and CEO and COO and CFO

  • Well, there are two primary revenue drivers in the -- in the long-term. In the short-term, there are probably even more than that. Short-term there's development revenue, so developing the solution and porting it to phones is something that we're currently recognizing that revenue today in today's P&L.

  • As the phones ship, we will be receiving per-phone fees for the VibeTonz mobile part of the system, which is the embedded portion in the phone. I think I've said in the past that we receive cents per-phone. Obviously the early licensees are going to get a more favorable fee structure, but it's cents per phone.

  • And then, there is content, aftermarket content, that is -- will be available for these phones. In the BREW system, it's quite an orderly system, where they have a developer program and a distribution system in place that allows for the collection and payment of fees. So, we would receive a percentage of the aftermarket content revenue derived by the content developers.

  • So, all told, there's really three basic forms, development revenues, per-phone fees, and then per-content fees for aftermarket content downloads.

  • Robert Katz

  • And companies like Nokia are really focusing a lot on like gaming for mobile devices as well. Would you be -- would they be interested in your type of application? Or are they out doing their own thing?

  • Victor Viegas - President and CEO and COO and CFO

  • Well, I don't really want to get into the specifics of our discussions with any particular company. But, when you're talking to the largest operators, developers and OEM providers, they see an opportunity to generate revenue, significant revenue, from using the VibeTonz system. When you -- when you look at that value, it goes throughout the value chain to all of the suppliers.

  • Essentially, our solution offers a full fidelity solution, a high range of fidelity and haptic effects capability. A cross-platform benefit. So, content developers can develop content that could be played on different -- different devices, as well as different operator networks and systems.

  • Many applications can be developed with our tool set and our technology. So, these span from music, ring tones, games, user interface benefits and a host of others. And it's a proven technology. It's a technology that has been initially developed and deployed in the gaming field. The same technology, in many respects in terms of the actuator technology, the firmware algorithms, and even the tool set, these are proven devices and proven technologies that we think the industry appreciates.

  • So, you know, emerging focus is just on this field of haptics, whereas many other companies have lots of other activities that might distract them. And we think we can bring a solution that is going to be very efficient for the industry as a whole, bring that into the marketplace initially here with the Samsung phone.

  • Robert Katz

  • Another question. What was -- what was guidance for next quarter, if you gave that out?

  • Victor Viegas - President and CEO and COO and CFO

  • I have not provided guidance, financial guidance, for quite some time and have not provided for fourth quarter or for 2005.

  • Robert Katz

  • Okay. And another question. Do you think there would be haptics inside sort of touchpads for laptops? Is that market ever going to develop, or is that not really enough value add in the laptop market?

  • Victor Viegas - President and CEO and COO and CFO

  • For those people who were at our shareholders' meeting, or probably have seen some of our demonstrations, you're referring to touchpad technology. And essentially, it allows you to -- to input data using soft keys on a display. You might recognize that on an ATM or various --different other devices. And our technology actually provides you with a confirming forced feedback effect, so that you -- you feel as if you're depressing a low profile button.

  • That technology is currently being developed where the primary market application is the automotive marketplace, as a control for input of technology -- for input of information via a touch-panel on a -- on a car. So, that's where we're currently developing and migrating technology, but we see lots of other applications beyond automotive, moving into ATM, point of sale displays, voting booths and so on.

  • Operator

  • Greg Syeth (ph), Private Investor.

  • Greg Syeth - Private Investor

  • Congratulations on the quarter and the announcement. I wanted some clarity on the QUALCOMM infrastructure. I thought I heard you say that, with the current phones in place with this new BREW System, those phones can actually be, you know, haptic enabled. Is that correct, or do you actually need the Samsung phones out in the marketplace to do that?

  • Victor Viegas - President and CEO and COO and CFO

  • It's the later. The BREW system is -- is a proven distribution and technology system that is quite extensive, as I've already communicated. And so, what we have done is we have developed an extension that would allow any developer who develops BREW applications or BREW content, couple with this extension, that would play on any Vibe-enabled phone. So, it will require a phone with our technology embedded, but there are very few limitations in doing that. It's something that can be done with existing phones, existing technology. We're not talking about a major investment in the phone architecture or the phone hardware.

  • So, we would first need a relationship with an OEM phone manufacturer. We would then port our technology onto the phone, and that's the VibeTonz Mobile product that I referred to. It -- it essentially turns the phone into a player. And then all of the Vibe-enabled content developed through the use of our VibeTonz SDK, that combination of content with the phone gives you this full fidelity of effects.

  • Greg Syeth - Private Investor

  • Okay, so this is great because, without this announcement, beforehand you can have all the Vibe phones you want out in the marketplace but, if there is no way to deliver the application or use it, it really -- you're missing a huge revenue stream. And this way, that kind of fills that big piece of the puzzle, right?

  • Victor Viegas - President and CEO and COO and CFO

  • Exactly. And it -- and it's a proven system with a high level of security, so tracking downloads and content sales are something that the QUALCOMM people, that's their business. So, it is a -- it's an important announcement and an important relationship for Immersion.

  • Greg Syeth - Private Investor

  • Then on the -- on the automotive space, we haven't heard much about that except for the last call on the touch screens. Any update on that? I know that's a little bit of a slowing forward-moving industry. Can we expect anything in the next few quarters in that space?

  • Victor Viegas - President and CEO and COO and CFO

  • Well, as I mentioned, revenue continues to grow in the automotive business. We continue to see more vehicles sold with our technology integrated. It is a longer design cycle and so most -- or a good portion of our revenue comes from development contracts. Some of those are wrapping up, some are gearing up and starting up, and others are kind of mid-stream.

  • So, we -- we had a lot to talk about this quarter. Didn't want to spend too much time on the automotive, just simply to say revenue is growing, development agreements and development work is in process. But, it is a slower design cycle and it will take time to see meaningful growth in that sector.

  • Greg Syeth - Private Investor

  • Great. Then the last question. On the Sony verdict, have others, you know, signed -- I know you have an ongoing lawsuit with someone else now, but have other vendors or OEMs signed up with new agreements or do you anticipate that because of the verdict?

  • Victor Viegas - President and CEO and COO and CFO

  • The other lawsuit that you refer to is the ElectroSource lawsuit. If you look at other participants in the -- in the space, we're engaged in numerous discussions with other -- other parties.

  • Greg Syeth - Private Investor

  • And ElectroSource, are they a rather large entity in the space as far as volume?

  • Victor Viegas - President and CEO and COO and CFO

  • They would -- they would be considered a significant player. Obviously, not of the size of a Sony or a Microsoft but, in terms of third-party activities, they would be considered a substantial player in the space.

  • Operator

  • Bruce Zipper (ph), Dakota Securities.

  • Bruce Zipper - Analyst

  • With the cash in the company dwindling a little bit, down to the 11.9 million that I think was discussed, and the losses continuing, do you guys feel that a cash infusion is going to be necessary going forward before you can turn to profitability? And if so, how would you plan on going about getting that money?

  • Victor Viegas - President and CEO and COO and CFO

  • It's -- it's clearly something that's on my mind. We -- we expect to have a good fourth quarter, higher revenues, lower expenses as we reduce the litigation costs dramatically from what had been a very substantial third quarter. So, we see a more favorable trend in the fourth quarter. Obviously, with growth in the rest of our business, the rollout of the mobility opportunity, we see 2005 as reducing the loss and potentially generating some profits in the later portion of the year.

  • And at this point, I'd have to say that I am considering raising additional funds. We do not want to be in a position where, through delays, whether it's appeals or other efforts, we do not want to come close to running out of cash. So, it's something that I'm considering and I'm continuing to monitor. During the fourth quarter here, I will be spending more of my time looking into those types of opportunities.

  • With that said, we continue to have significant interest from existing licensees in terms of pre-payment plans. We have interest from private equity partners. We have interest from existing shareholders. We have people interested in looking at making an investment, let's say with a debt structure involved. So, there are lots of different ways to raise money.

  • My main focus, though, has to be and continues to be turning the company profitable. Realistically, I'm not in complete control over that over the next few quarters given the legal activities. But, depending on how that works and how that goes, I will definitely be focused on looking at ways to raise cash.

  • Bruce Zipper - Analyst

  • Yes, I appreciate that. The point of the question being, I feel as a shareholder that the company is terribly undervalued here. And to have to come to the marketplace to raise cash, selling common stock just seems like the last of the alternatives. And I just wanted to voice that opinion.

  • Victor Viegas - President and CEO and COO and CFO

  • Well Bruce, I completely agree and that's why, you know, it's something that I am considering and weighing alternatives. So, I agree with your assessment.

  • Operator

  • Mark Hibash (ph), Vista Quest.

  • Mark Hibash - Analyst

  • Thank you so much and congratulations. I think the advancements in the market with regards to the medical products is fascinating. Can you go over a little bit of -- about how many different type of products and/or applications -- or how do you define that? Is it one machine which replicates different looks and feels?

  • Victor Viegas - President and CEO and COO and CFO

  • Sure. We have -- we have a number of platforms. I believe we have five platforms in total. And each of these platforms is -- is teaching or training a different type of procedure. I call it a platform because it usually requires a computer and a hardware device that's coupled with some application software.

  • The five platforms would be the CathSim, which is a training tool that teaches nurses and physicians how to insert catheters or needles -- needle stick type procedures. The second is our Endoscopy platform. The third is the Laparoscopy platform. Fourth is Endovascular, and the fifth is Hysteroscopy. So again, each platform would have a computer, hardware device and then application software.

  • If you -- we currently sell these products through our existing sales force, as well as through distributors, primarily in the international marketplace. If you were to look at the facilities that are buying these simulators, they would include medical schools, teaching hospitals, other teaching institutions, as well as medical device and pharmaceutical companies.

  • When you look at each of those market opportunities, the number is probably somewhere in the neighborhood of over 20,000 sites that would be a potential buyer of any one or more of these simulator systems. And then, when you look at the potential for multiple simulator sales in each of these locations, you arrive at a substantial market opportunity, which is -- which is what we're pursuing and going after.

  • Mark Hibash - Analyst

  • And those number you are sharing is basically in the United States of America?

  • Victor Viegas - President and CEO and COO and CFO

  • No, that would be worldwide. I think the statistics I have, there are something north of 7,000 locations in the U.S., and over 15,000 locations worldwide.

  • Mark Hibash - Analyst

  • Is there an ongoing maintenance fee from the -- from an installation?

  • Victor Viegas - President and CEO and COO and CFO

  • Yes, there would be potential revenue for maintenance, for warranties, for additional software sales and upgrades. So the one important element is the install base of systems and, two is the revenue we could generate from that installed base of systems.

  • Mark Hibash - Analyst

  • I mean, I think that's a phenomenal space and I'm sure it's going to grow rapidly. Congratulations again and thank you so much for your time.

  • Operator

  • John Matthews, Peyton-Macy (ph) Ventures.

  • John Matthews - Analyst

  • My question is, once the Sony lawsuit is over with, assuming that it ends favorably for you, do you have an estimate or an idea of what type of revenue would be generated from Sony on a recurring basis?

  • Victor Viegas - President and CEO and COO and CFO

  • No, I think it -- it really will depend on the -- on how the litigation is resolved. Obviously, there -- there could be a number of different ways to -- to resolve this. It could be a lump sum payment, which would not generate ongoing revenues. That would not be our -- our preferred method of solution. In fact, I can almost guarantee that that's not something we're interested in.

  • But, there will be some element for past damages and some element for future rights going forward. How we capture that and how they're reported is sometimes an area that gets difficult. But, we would expect some ongoing revenues from a settlement with Sony, and the amount and the character of the revenue is not something I can really predict at this time.

  • John Matthews - Analyst

  • So, would it be based on a -- potentially each unit that's sold that includes the infringing technology on a -- in a future basis, that you could potentially receive revenue on that basis?

  • Victor Viegas - President and CEO and COO and CFO

  • That would be one way of doing it, yes.

  • John Matthews - Analyst

  • And is that pretty much what you're looking for?

  • Victor Viegas - President and CEO and COO and CFO

  • Well, we're getting into a difficult topic, because the way that you track, report and calculate can be left to interpretation. So, there are a number of ways to be paid on ongoing royalties. It could be an annual minimum. It could be based on units sold. It could be limited to a certain field of use. But, as you can imagine, depending on how broadly the technology is used and how you define the technology, it may get more difficult to track and monitor.

  • So, the suggestion that you made is something that we would -- we would definitely consider. It would be in our best interest to tie revenue to units sold. Obviously, that's one where we both would participate in the success of the -- of the technology and the products. But, it's really very early to speculate how that could come about.

  • John Matthews - Analyst

  • Okay, understood. Do you have feature markets that you're targeting for application of your technology, like a roadmap type of idea over coming quarters and years? Different areas that you're looking to get into?

  • Victor Viegas - President and CEO and COO and CFO

  • Yes. We've --we've done a product roadmap for our existing businesses, as well as for additional businesses. And I might add that the opportunities greatly outnumber the resources of the companies. So, we are deliberately reducing the business areas and the product opportunities to focus on the near-term opportunities and achieving profitability as soon as possible.

  • So, we do have a product roadmap and a technology roadmap. And this technology can be used, not only in the current markets that we're operating in, but they could go well beyond it. But, it is a matter of allocating resources and staying focused on those markets that give the more near-term revenue growth and the chance for immediate profitability.

  • Operator

  • At this time there are no further questions.

  • Victor Viegas - President and CEO and COO and CFO

  • Okay. Well, I want to thank everybody for participating in today's call. We appreciate your continued interest in Immersion. Thank you and good afternoon.

  • Operator

  • Thank you. This concludes today's conference call. You may now disconnect.