Immersion Corp (IMMR) 2007 Q4 法說會逐字稿

Good evening. My name is Terrence and I will be your conference operator today. At this time, I would like to welcome everyone to the Immersion Corporation quarterly results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS)

Thank you. Mr. Viegas, you may begin your conference.

Thank you, Terrence. Good afternoon and thank you for joining us today. I am pleased to welcome you to this discussion of Immersion's results for the fourth quarter of 2007. With me today is Stephen Ambler, CFO and Vice President of Finance. By now, you may 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 Web site at www.immersion.com. Instructions on how to replay this call are also included in the release.

During the course of our comments today, I will be making forward-looking statements. These forward-looking statements include management's current analysis of certain aspects of Immersion's future business. Forward-looking statements are based on current information that is by its nature dynamic and subject to rapid and even abrupt changes. My forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected or implied in my statements. Factors that could cause actual results or developments to differ include the risk factors mentioned in today's news release and Immersion's SEC filings and in our Annual Report to shareholders, as well as any factors mentioned during our discussions today.

During today's call, I will provide a brief summary of Immersion's fourth quarter and annual financial results, an update on our focused businesses and the status of our CEO and Board member searches.

First, a summary of our fourth quarter and full-year 2007 financial results. We achieved a record $9.9 million in revenue in the fourth quarter, a growth of 15% over the same quarter in 2006. For the year, revenue grew 25% over 2006 to $34.7 million. Immersion has been profitable for each of the last four quarters. Our net income for the fourth quarter was $511,000 or $0.02 of earnings per diluted share compared to a loss of $2 million or $0.08 loss per share in the fourth quarter of 2006.

For 2007, our net income was $117 million or $3.71 of earnings per diluted share compared to a net loss of $10.4 million or $0.42 loss per share in 2006. Overall, our 2007 financial results are the best in Immersion's history. These results coupled with cash, cash equivalents and short-term investments totaling $138.1 million, as well as numerous organic growth opportunities provide a solid foundation for continued growth into the future.

Next, an update on our business. While financial results are one way to measure business success, Immersion is working very hard and making significant progress in a number of other areas to capture the substantial growth opportunities before us. Some of these efforts are visible in the public announcements we or other companies make or in the recognition we get from the press. Other efforts inside the Company are not generally visible to shareholders. Today, I would like to share with you a summary of the advances in our business that are public and give you insight into some of the things we are doing internally to strengthen our ability to grow. I'd like to start at the corporate level with published news recognizing our technology and pattern portfolio. Then, I will share some of the internal investments we are making in the areas of people, facilities, product development, business processes, intellectual property and M&A to facilitate both short and long-term revenue growth.

As we have stated before, our vision is to improve the user experience with electronic devices by making haptics as common as sight and sound. We believe we are the number one company in haptics and that the demand and market opportunities for our products and technology are substantial. Several recent media technology rankings and awards support this view. For example, Computerworld Magazine named haptic feedback one of the top-ten trends in 2008 that will fuel "the best year ever in personal technology." In January, Immersion's VibeTonz technology for mobile phones was included in Hot Trends 40, Global Trends to See, a compilation of 40 rising global trends identified as having a high growth potential by Korea Trend Research Institute in cooperation with the International Design Trend Center.

Immersion's TouchSense components for portable devices, which provide tactile feedback in response to touch screen interactions, won Electronic Design Magazine's Best Electronic Design 2007 Competition in the components, displays and touch screen technology category. The editors chose products they judge to be the most significant to advancing electronic design. The strength of Immersion's patent portfolio was recently recognized in a study that rated overall patent impact based on an analysis of 2006 issued patents. IEEE Spectrum sponsored a study performed by a consulting firm, 1790 Analytics, which was then summarized in a recent article in the magazine. Immersion ranked in the top 5% of the more than 1,300 companies evaluated in overall patent power. This is quite an achievement against the much larger companies we listed in our recent press release.

Immersion also ranked number one in pipeline originality amongst the top 180 companies. This indicator measures the variety of technologies on which an organization's patents build, based on the concept that inventions created by combining ideas from several different technologies tend to be more original than those that make incremental improvements using the same technology.

However, we cannot rest on our current IP portfolio in this fast growing and developing area of haptics. Developing, acquiring, and defending intellectual property is a core essential element of our business. We have carefully reviewed and refined our research activities and are investing more in research that can generate significant innovations for future growth in our target business areas. We have created an IP strategy team to optimize the creation, acquisition and commercialization of IP assets. In addition, we have established business processes to perform more competitive analysis, identify strategic market opportunities and partnerships, and investigate acquisition candidates.

Now, I will cover brief updates to our key focus businesses of medical, mobility and touch interface products, and give you a glimpse into what is happening behind the scenes.

First, our medical business. In the fourth quarter, we released a new software module for our existing CathLabVR simulator for minimally invasive coronary valve replacement training. We will be releasing more software modules for our LabVR and other simulators over the course of the year. We have begun the process of expanding our international selling capabilities by hiring staff and establishing facilities outside the United States. The medical simulation markets in Europe and Asia are each roughly equivalent to the size of the U.S. market, presenting a substantial opportunity for increased revenues from new and existing products and technology.

Moving on to our mobility business, our mobility business has grown from previous levels of a few hundred thousand dollars a quarter to over $1 million in the fourth quarter. We passed the shipment milestone of 10 million mobile phones with VibeTonz technology, with over 5.5 million phones shipping in 2007. Our VibeTonz system has been incorporated into a wide range of phones from basic utilitarian to full-featured multimedia models and from touch screen smart phones to high-end designer phones. These phones have been sold worldwide into many countries in Asia such as China, Taiwan, India and Korea, broadly across Europe and throughout the Americas. You might be aware of the high visibility phones with VibeTonz technology from Samsung and LG that were launched since our last conference call.

LG launched flagship models such as the Venus and Voyager offered by Verizon in the U.S. and the Viewity in Europe. Samsung launched the Ultra Smart F700 and the Giorgio Armani phone. Immersion's tactile feedback has been recognized in many press articles as a key feature of these touch screen or touch pad phones. At the recent Mobile World Congress in Barcelona, the largest mobile event in the world, Samsung previewed several highly acclaimed new models with the VibeTonz system coming later this spring, including the Soul U900, the F480, F490 and G400. LG showed the KF600 and KF700 with our VibeTonz system, along with the previously launched Viewity. While these are visible market indications of the growing momentum in the mobility business, I would like to tell you about what we are doing internally to grow. We have established new facilities and added people in Korea and Finland to better support Samsung, LG and Nokia. In the U.S. and Europe, we have hired dedicated people who are focused exclusively on influencing carriers to broadly specify our VibeTonz platform in hundreds of millions of phones.

We are introducing new VibeTonz technology such as haptic messaging and alerts to enhance operators' growing data services. In support of the operator effort since last November we have expanded our marketing focus to conducting an ongoing advertising campaign to educate wireless operators in the U.S. and Europe on the value of haptics. Today, we have achieved over 4,000 downloads of a new white paper entitled "Haptics improving the mobile user experience through touch" that presents the results of independent research showing user performance improvements and increased user satisfaction due to haptics. These are the types of investments we need to make to achieve the milestones we have set for the growth of our mobility business.

And finally, an update on our touch interface products group. During late 2006 and early 2007, we hired experienced automotive sales people and application engineers in Detroit and Germany. This investment substantially increased our market presence and led to an increase in our automotive development project pipeline. Unfortunately, due to confidentiality agreements, we generally cannot disclose the projects we are working on with automotive suppliers and OEMs or our design wins. We also cannot comment on their product development plans such as Volkswagen's recent public statement that every Volkswagen car will have a touch screen interface in the near future. However, I am pleased to be able to share two pieces of information today. The first is a design win with one of our licensees through its systems integrator and the automotive OEM.

We expect the new car will ship before the end of 2008 with Immersion haptic technology designed into its central control system for comfort and convenience function. This project is Immersion's first design win with this major automaker. The second announcement is a Visteon and 3M-demonstration car with Immersion touch feedback technology was showcased at the 2008 Consumer Electronic Show in early January. Visteon demonstrated an integrated center panel with sub surface switches that use the Immersion haptic feedback for a more natural button feel and input conformation. If you are interested, you can see pictures and read more about the Visteon car at the customer news section of our Web site.

Immersion also exhibited at the Consumer Electronic Show, focusing on our tactile touch screen solutions for portable devices, such as personal navigation devices or PNDs and remote controls. We are seeing very strong customer interest in our tactile touch screen and touch surface technologies across many industries. In response, we have added product-marketing resources and plan to add sales people to accelerate tactile touch screen design wins. We continue to work on product development and integration kits to support a wide range of product and technology solutions.

I would now like to move on to provide an update on my last topic, the selection of a new CEO and a Board of member -- Board of Directors member. First, the open search for a new President and CEO has resulted in a substantial number of interested and highly qualified candidates. We are looking for a new CEO with a strong sales and marketing background and a proven record of taking technology companies to greater levels of growth and profitability. The Board of Directors and I have been pleased with the high caliber of the many candidates we have interviewed. I have nothing more I can announce today, but I can assure you we are working diligently to select the best CEO to accelerate Immersion's future growth.

The search for a new member of the Board of Directors to broaden experience in our focus area of mobility is also very active. We are still in the process of interviewing a slate of experienced candidates with a diverse set of backgrounds in the wireless operator and mobile phone markets. I will now turn the call over to Stephen to give detail on our financial performance for the quarter and the year, an update on our stock buyback program and a recap of our investor relations' activities. Stephen?

Thanks, Vic. For the fourth quarter of 2007, our revenues were $9.9 million compared to $8.6 million for the fourth quarter of 2006, an increase of 15%. Our year's revenues totaled $34.7 million compared to $27.9 million in 2006, an increase of 25%. Both the quarter and the annual revenue numbers were record highs for the Company.

Our net income for the quarter was $511,000 or $0.02 of earnings per diluted share compared to a loss of $2 million or $0.08 loss per share in the fourth quarter of 2006. This was the fourth straight quarter the Company has had positive earnings. For the year, our net income totaled $117 million or $3.71 of earnings per diluted share compared to a loss of $10.4 million or $0.42 loss per share in 2006.

I would like to discuss each section of our income statement in order, starting with revenue, giving both fourth quarter and annual results. Our only business that is significantly and consistently affected by seasonality is our gaming licensing business, with high revenues in the fourth quarter due to holiday sales of our licensee's products. Quarter-to-quarter variations are also normal within our medical and 3D product businesses, which consists of mainly capital equipment sales. Looking at each of these businesses in turn, revenues from our medical business, which comprised 34% of total Company revenues for the quarter, were $3.4 million compared to $4.3 million in the year ago quarter, which was when we launched our endovascular 3.0 product.

For the year, our medical revenues totaled $15.4 million, up 9% from 2006 and represented 44% of our total revenues. Revenues from our console and PC gaming business, which comprised 26% of total Company revenues for the quarter, were $2.5 million compared to $1.7 million in the year ago quarter, and that's an increase of 49%. For the year, our console and PC gaming revenue totaled $7.3 million, up 48% from 2006 and represented 21% of our total revenues. Our touch interface product revenues grew 36% to $1.3 million from $936,000 in the year ago quarter. Revenue from touch interface products accounted for 13% of total revenues for the quarter. For the year, our touch interface products revenues totaled $4.8 million, up 33% from 2006 and represented 14% of our total revenues.

Revenues from our 3D products were also strong in the quarter, up 21% to $1.7 million from $1.4 million in the year ago quarter. Revenues from 3D products accounted for 17% of the total revenue for the quarter. For the year, our 3D product revenues totaled $4.8 million, the same as 2006 and represented 14% of our total revenues.

Our mobility revenues totaled $1 million for the quarter compared to $308,000 a year ago, a growth rate of 238%. Mobility revenues comprised 10% of the quarter's total revenues. For the year, our mobility revenues totaled $2.4 million, a $2 million increase over 2006 and represented 7% of our total revenues.

Analyzing our fourth quarter and year's revenues by category, total product sales revenues represented 43% of revenue for the quarter compared to 64% in the year ago period. 54% of product sale revenues came from our medical business, 38% came from our 3D business, and 8% came from touch interface products. For the year, product sale revenues accounted for 54% of total revenues and grew 9% over 2006.

Royalties from patent and technology licensing represented 41% of total revenue for the quarter, up from 27% in the year ago quarter. Gaming, mobility and touch interface products, all saw growth in licensing revenues. For the year, licensing revenues accounted for 34% of total revenues and also grew 63% over 2006. Development contract and other revenue for the quarter comprised 16% of total revenue. Medical comprised 67% of this revenue. For the year, development contract and other revenues grew 23% over 2006 and represented 12% of total revenues.

For the quarter, our gross margin was 77% compared to 76% in the fourth quarter of 2006. This increase is the result of the revenue mix change and is in line with our expectations. For the year, our gross margin was 75% compared to 74% in 2006.

Fourth quarter 2007 operating expenses, pre-litigation conclusions, totaled $9.1 million compared to $8.5 million in the year ago quarter. This increase was due to increased product development expenditure as well as increased outside professional service costs. Litigation costs totaled $530,000 for the quarter compared to $325,000 in the year ago quarter.

In mid-2007, Microsoft sued us in the District Court for the Western District of Washington State alleging we were in breach of our contract with them and that Microsoft was entitled to a share of the judgment monies and other sums we have received from Sony. We believe we do not owe them any sums and continue to vigorously dispute Microsoft's claims. The parties are currently conducting discovery.

We incurred non-cash stock based compensation charges of $786,000 in the quarter, of which $763,000 were included in operating expenses. This compares to $796,000 in the year ago period, of which $780,000 were included in operating expenses.

Interest and other income totaled $1.8 million for the quarter. In 2006, interest and other income comprised a net expense of $364,000. During the quarter, we accounted for a tax benefit of $200,000. In the comparable period a year ago, our tax charge was $13,000.

When calculating our year-to-date tax charge, we found that in Q1 of 2007 we had overestimated our state income taxes by $2.7 million. Thus, we had incorrectly accounted for the release of tax valuation allowances related to stock option deductions for prior years. U.S. GAAP requires this release to be made to additional paid-in capital within shareholders equity on the balance sheet. We mistakenly booked this release totaling $9.3 million against a tax charge on the income statement. We are, therefore, correcting our 2007 Q1 income statement to reflect this non-cash credit as well as our reduced state income taxes. It should be noted that although these adjustments reduce Q1 2007 net income by $6.6 million, they have absolutely no effect on the Company's previously reported or current period revenue, operating income, profit before tax, or cash balances. In fact, they actually reduce our tax liability by $700,000, increase deferred tax assets by $300,000 and increase cumulative stockholders' equity by $1 million. The total Q1 2007 tax charge is now $15.1 million on pretax earnings of $131 million and the earnings per share for the quarter is corrected to $3.91 per share from the previously stated amount of $4.13 per share. The annual financial results released today reflect these adjustments.

Our diluted earnings per share for the fourth quarter of 2007 were $0.02 per share. The shares outstanding used in this calculation were 32.5 million. For the year, our diluted earnings per share was $3.71. Earnings per share calculations are performed using the Treasury Stock Method.

Moving to the balance sheet. On December 31, 2007, we had cash, cash equivalents and short-term investments totaling $138.1 million, up from $137.2 million on September 30, 2007. Our accounts receivable at December 31, 2007 totaled $5.5 million compared to $5.3 million at September 30. Our days sales outstanding or DSO on December 31, 2007 was 51 days. As of December 31, 2007, we had 30.4 million shares of common stock outstanding and we also had 155 employees.

At the last earnings conference call on November 1, 2007 we announced that our Board had approved buying back up to $50 million of the Company's stock. At the time of the announcement, we hadn't put in place a specific buyback program nor selected an agent to perform that buyback. Both of these tasks were completed during the fourth quarter. However, at the time of completion, we had entered into a closed trading window. Consequently, in compliance with SEC guidelines and our established insider trading policies, we have not bought back any stock to date. The buyback program we have adopted and that is now in effect allows us to buy back stock beginning March 4, 2008. This plan allows us to buy back stock during both future open and closed trading windows. Going forward, we will provide details of actual buybacks at these quarterly conference calls and also in our SEC filings.

Since the last conference call, we have been active with investor relations outreach activities. We attended and presented at the Imperial Capital 2007 Global Opportunities Conference in New York, also at the AeA Classic Financial Conference in Monterey, at the Thomas Weisel Technology, Internet & Telecom Conference in San Francisco, and at the Southwest Securities Conference in Dallas. Over the last three months, both Vic and I, on separate occasions, have made investor road show presentations in New York and San Francisco as well as many presentations to investors at our headquarters here in San Jose. We plan to continue active investor relations outreach activities during the next three months by making more investor road show presentations and attending financial conferences such as the Cowen Technology Conference in New York and the Craig-Hallum Institutional Investor Conference in Minneapolis, both in May. Vic?

Thanks, Stephen. In summary, we see numerous market indications that the value of haptics is being increasingly recognized and we are very well positioned to deliver that value to our customers and shareholders. We have been careful in our past licensing deals to preserve the big upside potential in these growing markets. We are engaged in key activities to build the business through organic growth and investment as well as possible M&A activities. Our growth will require investment in new people, facilities, product development, business processes and marketing efforts. We have established business milestones and will adjust investment as necessary according to the rate of customer adoption of our solutions and market conditions.

Terrence, could you please open the call for questions?

Yes, sir. (OPERATOR INSTRUCTIONS) And your first question comes from the line of Benjamin Montgomery.

Hi, Benjamin.

Hi, Vic and Steve, thanks for your presentation. I just have one quick question. Having been a long-term shareholder and visiting with you guys on numerous occasions, I have always kind of consistently asked you the question, when you think our revenue is really going to start to ramp. And for the last quarter, it doesn't sound like we had any significant really ramping of our revenue. Do you have any kind of guidance for us in terms of when you might expect to see a real substantial growth in our revenues?

Sure. The answer is, right now, we are not providing guidance. So, I can't give you estimates on 2008 or into the future. For the year, I think as you noticed, revenue grew 25% in the quarter; I think revenue grew about 15%. So revenue is growing I think quite nicely. We still have a lot of work ahead of us in terms of design wins and product launches by our partners and licensees, and I think those initiatives will help us grow the revenue even more significantly. But, right now, I think we had good growth in all our business across the board in each of the different product areas.

Well, I think part of the issue that I have as an investor is that, I really don't have a handle on what we get paid for any of the stuff that we are out there selling and to have some notion about what we get paid per automobile for an installation or what we get paid per cell phone or some kind of parameter for us to base our expectations on. I don't know if you can provide us with any of that or if it's all so confidential that we are all suppose to just blindly accept faith in you guys as the -- what we are making our investment decision on. I think that as a long-term investor I feel little bit in the clouds with respect to what my expectations ought to be in terms of revenue ramping, what we ought to be expecting per quarter for EPS growth and those are all the things that investors need to know if they are going to contemplate putting money into Immersion. I don't if you guys can figure out a way to give us some better clarity on that but I would certainly appreciate it as a dedicated long-term investor.

Well, and I agree, Benjamin. I think we do a fairly good job of giving visibility. If you go through each of the business areas, in the gaming business, I think we have communicated pretty consistently that revenue is roughly 5% of the wholesale selling price of the products that our partners sell. In the mobility space, I think we have talked a lot about the kind of revenue model that we have with Samsung and LG in particular, and we have talked a little bit about the revenue model we have with Nokia. On the automotive side, we have talked about dollars per device and each car is capable of having multiple devices. So, I think that we have given visibility in terms of the per unit kind of revenue model that we have, maybe what has been a little frustrating is that we are at, in some cases, limited in what we can say because our partners have their own information flow and launch plans and we don't want to get in front of those and we are also limited by confidentiality provisions with regards to their royalty reports and their unit volumes and their activities in the marketplace. We will do what we can to keep improving and giving more information and I hope at some point in the future, we can begin providing guidance which I think will probably go a long ways to giving you some sense of where we are headed. But, right now, I just do not have the visibility and do not plan on giving guidance for 2008.

Do you understand the frustration though for your investor group out here? I mean, there are lot of dedicated long-term shareholders in this Company who really just don't feel like we have a good grasp of where things are heading and what the time table is going to be in order to achieve that and a lot of us initially came in purely as a result of the publicity that was generated through the Sony lawsuit, with the expectation that once we had that wad of cash in our pocket, we would really be able to ramp things, and perhaps it's just an expectation on my part that we ought to be ramping things more rapidly, now that we have the financial resources in order to get that done. And I mean, I have a sort of dollar cost averaged into this Company over the course of the last four years and was just reviewing my purchases from spring of 2006 and I paid $8.94 which is about where we were last week. And so, I'm a patient long-term investor, but I also expect to be achieving some kind of return on my investment over time, particularly since I am a dedicated long-term shareholder. And the other last point that I would like to make is that when I look at the percentage of ownership that I have in the Company and I look at the percentage of ownership by insiders in the Company, it would seem to me that, at this particular level, that people within the Company ought to be thinking about investing in the Company since to me it seems like its compelling value for the amount of cash that we have and what our prospects are for the future.

Thank you, Benjamin. Terrance, we are ready for the next question.

Okay. Your next question comes from the line of Michael Kim.

Hi, Michael.

Hi, Vic. Hi, Stephen.

Hi, Michael.

Yes, just in terms of the growth ramp, specifically as it relates to the mobility side, can you guys provide an update on your progress with Nokia? I think you mentioned during your prepared comments that you are adding some more folks over that neck of the woods and is that -- would you expect to start to see some commercial phones being launched in the second half of the year or sooner than that or just any sense on the progress there would be helpful, thanks.

Sure. As we mentioned, we have invested in facility and in a number of people that are there both on the sales and on the technical support side. So, we are actively engaged with Nokia engineers on porting our technology and integrating it across different products, platforms and content. So we are very satisfied, very happy with the progress there. In terms of when their products might launch, it will really depend on their decisions to the timing of the launch and the way they want to communicate. I think we believe that the first phones will begin shipping later this year, 2008. But, again, it really will depend on what the launch plans are for Nokia.

Okay. And are you guys currently working on a couple of models or are you simultaneously working on multiple models, similar to what we have seen so far with Samsung and LG and those efforts there?

Most of the effort is related to platforms. Nokia has a few primary platforms, Series 60 in particular, and so our effort really is on a platform basis which would transcend a number of different, not just models but actually product categories. So we think that the potential is significant and it could go across a broad range of phones and phone models.

Okay. And then on your -- on the last conference call, I think you did provide expectation ultimately to hit 50 million cell phones at some point. Can you give a sense of, if you expect to hit that run rate sometime, and I assume it's with Nokia, sometime in the early part of '09 or would you expect it to be a little bit further out than that?

Well, again, it will depend on the launch timing of not just Nokia, but also Samsung and LG and potentially other partners that we might enter into agreements with. So it's hard to project but we are reasonably confident that 50 million, actually more than 50 million is possible within either run rate early to late 2009.

Okay, great, terrific. And again, just turning on the medical side, can you talk a little about your efforts to expand the international channel? I think you have mentioned in the past outlook -- looking to grow into both Europe and Asia, just curious if you are adding reps or partner companies out there, how you are looking to expand internationally on the medical side?

Sure, we are definitely hiring regional Vice Presidents that will handle the sales efforts. In addition, there will be technical support application engineers in the field. The two primary growth areas will be Europe as well as Asia and we are also growing our sales force to go well beyond just the hospital relationships and into corporate accounts, to begin working with medical devices that need advanced training systems for quick deployment of their products and training of their customers. So a pretty broad based set of sales resources are being brought onboard and considerable marketing efforts to promote the capabilities and work with the certifying and the regulatory groups that operate within the Asian and European markets.

Okay, great. And just one last question on the CEO search, it sounds like you guys have identified a shorter list of candidates. I know a lot of things have to happen before we hire a new CEO, but can you give a sense of if you think that it's something we should expect to see later in the quarter or more second half type event?

Well, we are focusing on a shorter list. We are very happy with the candidates that we have met with, and I think it will be possible the next time we have this conference call we might have a candidate. I don't want to predict but we are getting close. We think we'll have somebody here in the near future.

Okay, great. Well, thanks very much, Vic. Thanks Stephen.

Thanks, Michael.

Thanks.

Your next question comes from the line of Mark Argento.

Hello, Mark.

Hey, guys, good afternoon. I have been bouncing three calls, so I hopped on the way, so I apologize if I am duplicating any questions you have gotten earlier. Just first off on a little housing keeping on depreciation and amortization expense in the quarter, Stephen, do you have that handy by chance?

Yes.

Also while you are looking that up, I know one thing that we have been more attuned to given the credit markets is any of the cash in any auction rate securities at all or are they all in government instruments?

We have no auction rate securities or asset-based, mortgage-based securities or any other structured investment vehicles in the cash balances or the short-term balances we have. We have got a pretty tight strict investment policy which would actually allow for some of those to be purchased, but we made the decision a couple of months ago to get out of those types of investments. So, we haven't held any for a while and we are not exposed to them.

Nice trade. Well, shifting gears and when you get that D&A, I can grab from you later as well, but thinking, looking at the business here a little bit more, I know the 3M relationship, Vic, on the touch panel for casino games, clearly, I know there has been interest there but we haven't seen anybody step up and really take ownership and implement that technology within any of their devices. Can you speak a little bit about --- is that a, should we basically write that off? Is there an opportunity there in '08? And could you kind of handicap that as best you could for us?

Yes, sure. Actually, I think it's a great growth opportunity and you would never want to write that business off. The effort includes the preparation of design efforts for our partners which takes time. Integrating this into cars, for example, is actively ongoing. We have a large pipeline of automotive implementations. There are active programs in office products, industrial products, a number of different markets. In terms of 3M's efforts, it's primarily focused on the casino gaming. I believe they had a customer's [filo] at the G2E Show in November, demonstrating touch panel as well as touch screen on three different games. I believe at the ICE Show, they were showing more implementations. I believe they have a number of customers who have products that are about to go into certification as required in order to be launched into the marketplace. So I think there is a lot of activity and I would expect, in the latter half of '08, for you to see a number of products in the market with the emerging TouchSense technology.

So, certification is the prelude to this product than what's actually going on to a casino, or than being able to be sold to a casino?

No, I think they would sell the haptic kit, if you will, with the technology, the actuators and that would then be integrated into a product and they would produce these products and then forward those to the certifying groups and then once approved, then it would be put into the marketplace. So to answer your question, they have the products and they are in the final stages of submission to the certifying bodies and once that's done, then those products can be sold and used on the casino floor.

Shifting gears over to the medical business. In terms of 2008, are you going to be launching any new big platform upgrades or is it going to be mostly module sales?

I'm sorry, Mark, could you repeat that question?

Yes, in terms of the medical business in 2008, could you just kind of walk us through the product pipeline there? And specifically, are you -- do you have any platform systems that you are going to launch or will it all be follow-on module sales to the existing platform?

I believe that we will launch new modules to existing platforms. We are also working with partners where we will be distributing their products with haptic solutions to the marketplace through our sales channel. And then, we are obviously growing out the distribution channel, as I mentioned before, primarily on the international front. So there are a handful of products that were in development platforms that Immersion is developing that may make it into the market in 2008, they may actually be launched in 2009, but we have a pretty robust product road map that includes not only internally developed programs and modules but also external partner products.

And then, moving right along to the mobility side, you guys I think put a press release out earlier this week, you've -- in '07, you shipped -- there were 5.5 million phones that shipped with your technology in the device. I don't have the exact number of phones but I think you might have put it in the press release. But, are you starting to see the kind of, if you look at the number of units per phone, have you seen that number increase, meaning are you -- are they -- your partners LG, Samsung -- [not only] Nokia, but LG and Samsung right now, are they starting to put this technology into some of their more larger mass market units versus just the high-end smart phone that we are starting to see a ramp per unit or per phone shipped in terms of the number of units, not to overly complicate things.

Yes -- no, absolutely, in the fourth quarter of 2006, I think our Samsung shipped their two high-volume phones through Verizon with our technology and in the fourth quarter of '07, you saw high-volume products such as the Viewity, the Voyager and the Venus, so you are seeing mainstream high-volume phones and that's why we are seeing a substantial increase in the number of phones shipped in '07. And when you look at the line up that was semi announced or at least displayed at the most recent show in Barcelona, you are seeing our technology across all the spectrum of products whether it is touch screen based or high-end phones, but they are quite mainstream phones using the benefits and advantages of our VibeTonz technology.

And the, I think, $2.3 million you guys booked in mobility for the full year, about $1 million in the quarter, is that all for handsets?

It's all for the mobility business. It's a combination of license fees, royalties, some development works, some NRE fees, a number of different forms of revenue, but it's all related to the production and sale of cell phones.

And then lastly, I know, following the video game business or industry a little bit, it sounds like PlayStation 3, Sony's platform is finally starting to sell to that unit, it's actually starting to tick up a little bit. I think part of it is probably pricing and finally they cut, and a lot of large numbers caught up to Nintendo, but are you starting to see that positively impact that business in particular, i.e., I know that the overall gaming revenue has grown fairly nicely for you guys. Is it mostly comprised of PlayStation 3 peripheral sales?

Well, as you mentioned, the gaming business definitely was strong in the fourth quarter as is usually the case because of the seasonality. If I'm not mistaken, I think I saw an article where Sony announced they are launching PS 3 with vibration capability in April, at least in the United States. So, it's clear that there is a wide support of games and so we would expect them to be successful with that product launch. In terms of third party providing peripherals, I am not sure exactly how much is going to be allowed. I believe Logitech may have some products out later but, for right now, it's not clear what the licensing terms are between Sony and their third-party suppliers.

But, right now, all your gaming revenues still old Play Station 2 or Play Station revenue or rather Xbox revenue, not -- you got no PS 3 revenue basically in the numbers yet?

Well, so you have got revenue coming from a few different sources. One, the license that we entered into with Sony that covers the Play Station 3, so we generating revenue directly from Sony. And then from the third-party products, it will typically be the older platforms for the Xbox, the Play Station 2 platforms.

Right. So, the gaming revenue, the $2.5 million includes the amortization of the Sony deal that you guys signed earlier this year?

Exactly, yes.

But, I guess what I am trying to isolate is basically there is an opportunity assuming the Play Station 3 -- the third-party guys start producing vibrotactile feedback controllers, so there is still upside and potential growth for that line.

When the third parties start launching vibro-enabled controllers for the new platforms, we would expect to benefit from that.

Right. And there are, just an FYI, there are Logitech and some of the other guys do have Play Station 3 controllers out there. Of course, I don't think they have the technology embedded in them yet, but I would assume Sony will probably most likely allow them to do the vibration as well, so let's hope. That's all I got. Thank, guys, appreciate it.

Mark.

Yes.

Yes, I am ready to answer your question.

Okay.

On amortization and depreciation.

Okay.

What was the question?

What is it?

What is it? For the quarter, it's $550,000, so a run rate of between $2 million and $2.2 million per year. If you are looking at that type of thing within the income statement, don't forget that non-cash stock base charges were also $786,000 in the quarter.

$786,000. $550,000 for depreciation and you have some amortization you break out, $250 million or $260,000?

Yes, that's right. So, it is $260,000 amortization. I guess you could say it's roughly $300,000 depreciation and $786,000 stock based compensation.

Great, that's helpful. Thank you very much.

Thanks, Mark.

Your next question comes from the line of [Bernie Brown].

Yes, Hi. Good afternoon, I was -- unlike the first caller I am looking forward and actually I feel really good about this investment and I have a question about the VibeTonz in Nokia. Would it be safe to say that when Nokia launches the products with VibeTonz that that will be the largest telephone provider, I mean, are they going to have the bulk of the market share is I guess what I am asking, compared to Samsung and LG as an example.

Well, I think if you're looking just in terms of shipment of phones, Nokia is clearly the industry leader. They have the number one position. I believe Samsung and LG are also in the top five, so we have three of the top-five OEM's license. Cleary, if Nokia were to deploy this across their Series 60 platform, then they have the potential to be the largest shipper of VibeTonz enabled phones and that would be our expectation.

Right, okay, very good. Now, with regard to the stock buyback, how nimble are you able to be? Is that going to be based on prices or a predetermined schedule?

The SEC, and appropriately so, they limit your ability to buy or sell stock into open trading windows, if you will, when there is no confidential information. But, they do allow a trading program to allow you to buy or sell stock outside of an active trading window and that would be using a 10b5 program and that would require you, when you are not in possession of confidential information, to establish a buying formula or a buying strategy. So we've done that, we've documented that in a plan and that will allow us to execute that plan inside or outside a normal trading window. It gives us the best flexibility but it is pre-determined based on the plan as you establish it. Now, once the plan is established and over a period of time, you can modify the plan, you can enter into multiple plans or terminate plans. So, I think it provides us with a tremendous amount of flexibility and I think, as Stephen mentioned earlier, that that will be in place and potentially effective beginning I think on March 4.

Yes, okay. All right. And it's just entirely not clear to me with the PS3, the [rumble] returning and everything, just to make sure it's a 100% clear in my mind, there will be no direct additional revenues from Sony unless they tweak the process, but it will be income hopefully from third parties, is that the correct interpretation?

Just about, yes. So, in the -- we entered into a license agreement with Sony that covered the non-litigated products technology and that agreement required payment over, I believe, a three-year period, but we are recognizing that over a 10-year period, and that covers haptic technology used on the PS3 platform. Now, if they were to include haptic technology in other gaming platforms such as the PS4, potentially in the future, or their PSP or any other gaming device, then that would generate additional revenue above and beyond what they paid in terms of the lump sum. Now that that technology is deployed in the PS3, then typically the third-party providers, people like Logitech and Mad Catz, Electro Source, they produce peripherals that play on the PS3 platform and then under our license agreements in place with those companies, they would typically pay us royalties for the sale of those products.

Okay, good. And the final question is, are you actually interviewing CEOs now or are you just narrowing down the field?

I'm very actively interviewing CEO candidates on a very frequent and regular basis.

Very good. Okay, thank you very much. I appreciate your response to the questions.

Thank you, Bernie.

Your next question comes from the line of Ron Levin.

Hi, Ron.

Mr. Levin, your line is open. I will move on to the next question and that question is from the line of [Justin Gingerich].

Hi, Justin.

Hey, guys, how are you doing?

Fine, thank you.

Great. Congratulations on the quarter and the year. My question is very, very simple and just one question. You talked about international growth in the European and Asian markets, what impact do you expect that to have on your operating margins?

Well, we operate around the world in a number of our markets and the initiative that I think we are giving some visibility into is specifically into the medical business where we have been concentrated on the U.S. market and using a small network of distributors around the world. We are now investing much more heavily in terms of the sales talent, the technical support talent, the marketing programs and the partner relationship activities in the international markets, focused primarily on the medical simulation market. And as I mentioned, we are hiring these people. We have hired some, we are hiring more and the extent of that investment really will be determined by the success we are having and the sales activities in the hospitals and with corporate partners.

Okay, great, thank you.

Thanks, Justin.

Your next question comes from the line of [Mark Kabbash].

Hi, Mark.

Hey, guys, how are you doing?

Great.

Quick couple of questions. One the Verizon recently has a flat rate of $100 per phone. The way I understand it, that would be a very compelling reason to deploy the ARPU, being more active in the ARPU market. Do I have that accurate, do you feel the same way?

Well, I think the ARPU is average revenue per user and I am not sure I understand the higher product offering in terms of the subscription plans and the messaging and all of the different activities. But, assuming there is a flat rate and they are able to sign up a large number of users, then presumably they will increase their user pool, will generate more demand for phones, and Verizon has had a lot of success with vibe-enabled phones, so we think that would be positive for us. I am not exactly sure what impact it has on their ARPU though.

Have we increased the -- in the mobility business versus the gaming business, is the revenue model different pertaining specifically to the software manufacturing side? Do they pay us directly a royalty payment or how does that work out?

On the gaming side, we launched in the PC space many years ago, it was uncommon to charge for tools and in an effort to accelerate adoption of our technology and the handset or the device, the peripheral, we provided download license rights for the content community. So, you see on a lot of PC games, the use of the haptic technology to enhance the games. We have done this a little differently on the mobility side. We provide an [SPK], we license that and we have entered into a number of different content developer agreements where they have agreed to pay us royalties based on the sale of the content and I think, as I have mentioned in previous calls, that's the preferred model to be paid cents per phone as well as cents per download of each content. The current relationships however, we have been waiving the content fees in an effort to accelerate the adoption from the content community and as we probably talked before, we are busy working on getting a large installed base of phones and we think that will provide a very fertile marketplace for enhanced content and at some point, we will be able to collect on both sides, the handset as well as the content.

Understood. Do you have any idea the size and scope of the handset, the 60 that Nokia puts out, what -- how many units they do on an annual basis?

I really don't know that number. I think they are over 300 million in total and I think it's something, some large percentage of that, I think less than 50%, but a pretty substantial percent of that is Series 60 phones.

The last quarter, if I remember correctly, Nokia shipped over 100 million handsets worldwide and considering the fact that Apple thinks it's an accomplishment to do 10 million in the year 2008, I think you guys are doing phenomenally well with regards of doing -- getting that number installed base with VibeTonz actuators to date. The Microsoft timeline, this lawsuit, is there any additional discovery or how does the calendar work for that?

We have -- we have progressed through. I think that we have had at least one court mandated mediation session. We are in discovery at this moment and I am not sure if the actual trial has been put on a calendar, but we are working through the discovery phase and then we will be actively preparing for the litigation phase.

Pertaining to the automotive industry. I could see a couple of compelling reasons why they would do it -- cost reduction and manufacturing safety, feature comfort, weight reduction; but what is the overwhelming factor that you hear from the automotive side as an OEM that they would embrace haptics?

Well, you just covered most of them. I think it's reduction in the glance time. I think there is no doubt about the satisfaction level for consumers. People like to feel the confirmation of a tactile vibration effect, so they are more accurate, they have more confidence in their input, they spend less time focusing on a task at hand and instead focus on driving the car. You are able to consolidate more functionality in these devices whether they touch screens or rotary knobs, so instead of layering on multiple inputs from knobs or other areas you can consolidate in a central location, so there is tremendous value. I think there is cost advantages as you have mentioned. I think there's a branding advantage where you can actually create the right sense of effect, so that you feel something similar throughout the vehicle. There is a feel of quality or branding that the car companies appreciate as well. So, all these are advantages and they are sometimes slow to adopt new technologies, but it's clear they see the future and I would say just about every major car company is aware of the benefits of haptic technology.

Is it limited to the interface on a screen or is it also possibly with the drive-by-wire aspect like a clutch or steering?

Yes, so that's definitely an area that we have had some interest and some activity, but I would say the current activity in terms of [finding] it into a vehicle, we are seeing a lot of interest on the touch screen and the rotary knob, so it's mostly in the user interface. But, as you said, haptics is an important element in drive-by-wire. Whether you include this capability on steering, braking, throttling or the transmission, you can eliminate fluids, mechanical components and areas of failure with sensors and motors, if you will, and have your onboard computer drive and maintain and affect lots of activities within the vehicle, but you lose that sense of touch. And so, haptics offers that back and I think it's going to be a key ingredient in the drive-by-wire products of the future.

Two last quick questions. In these greater than 700 patents that we have to date in our portfolio, do we cover some of that drive-by-wire aspect in the portfolio?

Yes, we do.

And lastly, for now, is the kiosk. A couple of quarters ago we had put out a press release regarding kiosks and the potential of being embedded in some of the units. Have they been shipping it and what do you foresee in that arena?

Yes, the kiosk market is one that is readily available to us, quite interested, sees the value proposition and the customers obviously enjoy the effects. The kiosk industry is also impacted by pricing, so trying to integrate our capabilities and increase the BOM cost is sometimes challenging. But, the value is there, there is interest there, and I would expect that market to grow for us.

Great, thank you very much, guys. Keep up the great work. Hi, Stephen. Bye, Stephen.

Hi, Bye.

Thanks, Mark.

Your next question comes from the line of [Chuck Shivery].

Hi, Chuck.

Hi, Vic. A couple of just housekeeping things. What's the current number of employees?

There's 155 employees.

155 and then based upon what you had back in January to now, as far as the job openings, they have seemed to [either] more for change. Are some of those positions either dropped and/or filled?

I believe the majority were filled, yes.

Okay. And then just what Mark had talked about. I thought Kiosk Information Systems used to be a partner. Are they still a partner? They are not shown on the page anymore?

I haven't looked at the Web site lately. I know we have revised it periodically and I believe we still have a relationship with them. In fact, I am very confident we do; but why you can't see them on the Web site, I'm not exactly sure why not.

Okay. And then last conference call, you talked about a new handset licensee that may come about before the end of the year. Can you give us an update on that?

Sure. I think I gave an answer in response to a question that I feel that we would have another handset OEM signed by the end of 2007. I said, yes, that was my prediction. It turns out the answer is no. We did not sign another OEM by the end of the year. I can tell you that we are still engaged with two OEMs and I would say they are advanced discussions; but we still haven't reached agreement on all the issues. We are not going to try to rush an agreement to signing just to meet the CEO's prediction. So we are working to close those. We have got sales people actively engaged, but right now I don't have any update in terms of when or if we will be able to bring these new OEMs to the table and close to a license agreement.

Okay. And last conference call, you said that there were up around 50 phones in the pipeline. Can you give an update on -- is there more or less phones in the pipeline now?

From my understanding, there is a very slight increase but roughly the same. So the phones that have been launched have been filled by new projects.

Okay. And just one IP issue because I know you had stated that if -- when the new CEO gets there, he would be focused on sales and marketing, and you are kind of overall specifically on the IP issues. Has the Company looked at Nintendo or some of these other manufacturers that are looking to incorporate haptics or have already incorporated haptics into their products?

So let me clarify. The new CEO we are looking for is someone we expect to have strong technology experience and background, really advanced sales and marketing skills and appreciates the whole product management, product marketing kinds of capabilities that we need. My role going forward as the Chairman of the Board will be just that, on the Board. To the extent that the new CEO will want my input or my involvement maybe in IP issues or M&A or anything else, I'm happy to be available for that, but I want to make sure it's clear the new CEO will be in charge of running the Company.

In terms of companies that have launched products with haptic capabilities that we have communicated are not licensed, we continue to work in terms of understanding the products' technologies and activities and deciding what our course of action will be. It's probably a good place to maybe remind you that Immersion has been around for 15 years. We have only initiated litigation in three instances and two of those were in gaming areas, Interact Accessories and then there was the Sony, Microsoft. The third case dealt with a party that was related to the Sony, Microsoft and in all three of those cases, we were very pleased and the result was a favorable outcome for Immersion. But, those actions really came about after long and substantial negotiations, discussions and analysis; and I might as well give you kind of a few things that are required if you are going to do this right. There is some exhaustive level of negotiation that needs to take place. There is a full analysis on whatever the alleged infringing product or technology is. We need to be really careful about understanding our own IP. There is also the timing of activities at the patent office whether we have patents that are pending or are about to issue, so there is a timing element. There is the market timing and impact; you want to be sensitive to how this is managed. From that standpoint, you need to select a solid legal team, not just attorneys but a support group that is ready for the long battle that should be expected, and then there is obviously the preparation of the case itself, the filing of the case and so on. I do give you that detail because I want to make sure you know that we take this very seriously. We try very hard to try to resolve issues before we end up in court; but if we do decide to go to court, we are very thorough and thoughtful about how we approach that.

Okay, thanks. One last question, last conference call, you also said that you were either going to reserve or use cash for, number one, investment in market growth initiatives; number two, is possible litigation; number three, is IP acquisitions; four, is company acquisitions; and five, was the share repurchase. Out of that list, is that a good prioritization and based upon that list, two of them were acquisitions, are you looking at either IP or company acquisitions in the future?

It's hard to predict in terms of priority. I think that is still the right list. If you look at the kind of acquisition efforts by last count, I think we kicked the tires on about 14 different efforts whether -- in a couple of cases, it was IP; in other cases, it was financial or complementary type technology. So we have been active; we have a few of those that we are considering. But, right now, obviously nothing to announce. But we are mindful of those opportunities and as you mentioned, the other areas are the stock buyback as well as the internal growth initiatives.

Okay, great. Thanks a lot, Vic.

Thanks, Chuck.

Your next question comes from the line of [Randy Coon].

Hi, Randy.

Hi, thank you gentlemen for taking my call. I wanted to follow-up to see what is the Company doing in terms of trying to get its name out there a little bit more either in the analyst community or by some other way to be able to increase exposure of Immersion to perhaps make the Company -- where people will turn to the Company and may become interested and to help raise the share price of the stock?

Well, we did mention a pretty active investor activity over the last three to six months, a lot of things that we have been doing. Before the resolution of our Sony differences, most of our activities really were dwarfed by the litigation activity and once that was resolved, we have now spent a lot of time and energy, not just in promoting the benefits of haptics, but also Immersion as a Company. We have spent a fair amount of time. I think I have been to New York three times just in the last few months, primarily focused on communicating the Company strategy and talking to people about the things we spoke about here today. Stephen has been quite active. We have I think a number of new opportunities coming up here with Cowen and with Craig-Hallum. And so, we are as active as we can be. We have an Investor Relations group that helps us in targeting investors and constantly work on improving our presentation and our demonstration kits, so that we can communicate the value of haptics. It's a pretty broad based effort and in conjunction with the corporate marketing activities, it's one that we are trying to find the right balance between marketing and promotions and then execution and operations.

Well, have you been happy with the share price, the way it's been? I mean we hit a high sometime probably maybe in 2007 of approximately $21 or $22, something like that and then of course it's come down considerably since then and bounced off, but it just seems until we get some type of, I don't know how many analysts actually follow the Company, but until we get some more exposure, it seems like the stock price is going to kind of be a laggard and I would like to see that change.

To answer your question, I'm not happy with the stock price; but I also recognize the market has been under quite a bit of pressure, small-cap tech companies in particular. I am focused on growing the Company. I think when the Company grows and executes on its strategy, then the marketplace will appreciate those advances and the stock price hopefully will be reflective.

In terms of pure effort on the stockholders' side, as I said, we are active in today's marketplace. Trying to attract analysts to provide coverage typically is connected to an investment banking relationship; and so if they are paid fees, you have a better chance of getting analyst coverage. So we are constantly working on educating people and trying to get broad based coverage; but for a small-cap tech company, it sometimes can be challenging.

Okay. And one last question if I may, a follow-up on Benjamin's question earlier. Why is it that there has not been at these stock price levels more interest in inside ownership where we have been able to see that you believe that the Company is undervalued as well and (inaudible) as investors some sense that we are on the right direction by having some inside ownership, additional purchases?

Well, I guess I would say that as an insider, there are limitations on when you can buy or sell stocks. So, the SEC has pretty stringent rules when you can do it and you are not able to buy and sell in -- I think in a six-month window, something like that. I have a considerable amount of my net worth tied up in options related to the success of the Company. So to increase that by purchasing more shares, I'm not sure that that's going to show any more indication of my confidence in the Company's future. I already have a substantial position in the Company. So, in terms of other parties and their interest in investing and buying in stock again, I think the majority of people have a considerable portion of their net worth tied up in either the options or the activities at Immersion.

Would it be an untrue statement if I said that when you are given the ability to be able to possibly purchase more shares as an insider of the Company that you probably would do so?

I'm not sure I understand the question. I currently have the ability to do that; but as I mentioned before, the SEC limitations in terms of buying and selling and the exposure to an insider are significant; and I don't see the correlation between my buying and selling and the confidence I have in the future of the Company.

Well, again, we don't have the information that you do obviously working there at the Company, but as investors certainly we have always been taught that when you see insides buying of a Company's stock by the insiders that certainly is a very good sign; and if the stock is trading down into the single-digit levels, that if we don't see it, it gives us pause to wonder exactly why that's not the case. So that's all really the point that I was trying to make, but we will continue to hope for the best and go from there. So, thank you very much for taking my call.

Okay, thank you.

Your next question comes from the line of [Eric Vanswall].

Hi, Eric.

Hi, Vic. I got a couple of questions for you. Trying to read between the tealeaves of your recent press release about the 10 million cell phones being sold, can I make the assumption that about 4 million cell phones have been sold in the last two months?

No, we have been selling -- VibeTonz phones have been sold now for a number of years. I think, as of now, we are over 10 million, is what the press release stated. 5.5 million of those shipped in '07 and some number before that on '06 and I believe some in '05 as well.

You had implied just a few hundred thousand phones were shipped in '06. Is that --- am I wrong in that assumption?

Yes.

So, it is many millions in that time period?

Yes, I don't remember how many, but clearly there were millions because as I mentioned 5.5 million minus 10 million or 10 million minus 5.5 million leaves you with about 4.5 million. So, yes, there were millions sold in '06; and then if I am not mistaken, there were a number of phones out in '05, so that also added to that total balance.

So you're telling me that the acceptance rate is pretty darn slow and it's going to take a long time to get to your 50 million cell phone figure?

No, I'm not saying that at all. I think what I am saying is that the first phone that launched was the M330; it was targeted at the gaming community. I think on an optimistic estimate it was only intended to sell a few hundred thousand units; and those early phones, the volumes were very low. They were high-end phones targeted at very niche markets. They were intended to prove the value proposition, make sure that the power consumption was manageable and that they were appreciated by the consumers; and once that occurred, then as you saw in '06, the take up rate was higher, lot more phones; '07, 5.5 million phones, a lot of models. And now we, we sit here with more models than ever and they are mainstream models, so we are expecting a continued growth in the volume and that most of that volume was through Samsung. And then later on, we licensed LG and we have yet to see any phones launched by Nokia, so I think the relationship's in place, the momentum that has been created and the market acceptance is significant and you will see the adoption rate grow dramatically.

I know you don't give guidance but we are two-thirds through this quarter. Do you feel that we are equal to or better than this point last year when we were two-thirds through the quarter?

Again, I am not giving guidance, so I can't give you any help on that question.

Okay, taking out, I guess we had about --- last year, we had about $300,000 in interest income; this year, we had a $1.8 million, so we have made $1.5 million in interest this year. We take that out of the numbers. Are you basically saying to us that we broke it even this year or maybe lost a little bit, forgetting about interest?

So, I will answer that. So those numbers you just quoted are not actually right. In Q4, we had an interesting income of $1.8 million, so that's a run rate of about $7 million per annum.

Okay.

Last year, that was before the Sony litigation conclusion, we were actually incurring interest mostly on a debenture that we had, that we no longer have. That's 2006 through to the summer of 2007.

If I took interest out of these earnings, would we be making money at this point or losing money still?

Well, we would not be making money; we do not make an operating profit at this time.

Okay.

In fact, in the fourth quarter, we made an operating loss of just over $1.5 million.

Okay. Did medical decline year-to-year or not? It wasn't clear to me.

No, I said medical actually increased 9% over the previous year.

Okay. And first of all, Vic, do you ever read the stock message boards?

No, I --- once in a while, someone will forward me a link to a message, but I stopped reading the boards probably three years ago.

Go home tonight and read the InvestorVillage stock message board. Everybody is very upset with you. I think the way you treated Benjamin on that first phone call, cutting him off, hanging up on him in essence was unconscionable and I also own more shares than you do and I don't think I will anymore.

Terrance, I am ready for the next question.

Your next question comes from the line of [Alex Berman].

Hi, how are you doing?

Hi, Alex.

Hey, a couple of questions. The auto products you are talking about, would that be more of a product sale or just sort of a royalty that you get when you're in a rotary knob or a touch screen?

We mentioned a new OEM that will be launching a vehicle with our technology that will be on a royalty basis, so per unit for the product in the car.

Is that very typical of the auto opportunities or it sort of varies?

The typical relationship is an early development effort where we are porting our technology into a -- some aspect of the vehicle whether it's a control knob, touch screen, touch surface, so there is some development effort and usually there is a royalty -- excuse me, an NRE fee that's paid and then when that vehicle is launched into production, then typically we are paid a royalty on a per device. Typically, there is one device in a vehicle, but in some cases there are multiple devices in each vehicle.

Got you, okay. Any sense whether the design win you discussed earlier, is it, you think might be a high volume auto model or any feels to that at this point or --?

Too hard to tell. It's -- obviously, we are not in a position to pre-announce the vehicle, so it is a major manufacturer as I mentioned; and it is always nice to see the car, see the technology produced and launched in the vehicle, so we are pretty excited about that.

Got you, great. Just a [clarification]. You mentioned there were a couple of handset guys you were talking to. That's -- is that also the case like last like last quarter or is there someone new you are talking to or is it more of less people you've been talking to for a little bit or is it someone -- anyone new that you are talking to, that you weren't talking to before?

Well, I think the two that I'm referring to, we were talking to them last year, but I'd also say we've got meetings periodically with almost every other major supplier of handsets. So we have discussions; we have technical meetings. The ones I'm referring to though where in what I would call advance stages of discussions, negotiations.

Got you, great, great. Hey, just a final thing, maybe it's something to help investors out and I'll give you one too. There is a lot of details, like in information that you go through on the conference call. Is that something that you maybe would be willing to put in the press release in the future just to sort of, I could think it would save time for questions and it would be great for us just to have that data right in a nice clean press release but something for you guys to think about doing.

Yes, there is a timing issue. So getting the material in a press release, there is the cost of the press release, the timing of issuing the press release in advance of the call. I'm not sure people would have a lot of time to digest that, so I think what we rely on is a complete set of information in the press release and then we follow up with this conference call where we give quite a bit more detail and this is obviously recorded, so it's something that people can have access to at their leisure, take the time to understand the information in more detail.

Okay, great, and just like to say that as an investor, we are happy with your conduct and don't see any issue with the way you behave. So best of luck and we'll look forward to the next call.

Great, thank you, Alex.

Your next question comes from the line of [Lee Bushler].

Hi, Lee.

Good afternoon, Vic. I've got two questions for you. The first, I know this is in the area of guidance but maybe you can provide a little bit of this if you wish. If you were able to simply rank order your major businesses for 2008 by your expected aggregate growth, let's call it just growth in dollars in revenue, could you do something like that? Announcing medical is three, console gaming one, touch interface two; of course, that's not the case, but is that something you might be able to do?

You know I don't think I can, I --- so we are talking about growth in terms of percent growth over '07 or are we talking about dollar growth?

I think dollar growth might be more interesting. Percent growth, yes, let's try dollar growth if you don't mind.

I would say just from the sheer size of the medical business, given what our expectations are for '08, I think the dollar amount should be.

First there, Yes.

Should probably be number one and I'm -- depending on the design wins and the timing of the certification efforts, I'm hoping that automotive and our casino gaming business would make the tip -- maybe the second highest growth opportunity in '08.

Okay.

And then the mobility which has potentially the biggest potential longer term, just based on the sheer time it takes to get phones in the market and generate the revenues from those royalties, that that probably would be number three.

Okay.

We are also looking at gaming opportunity, so that's another area we'd like to see growth with the PlayStation 3 incorporating haptics. Hopefully, we'll see strong third-party support of that and that could also lead its way to revenue growth.

Okay. All right, that's good. I have a separate question on the CEO matter. I would have to say I talked this over with a few of my friends; now I'm just a little confused, so maybe you could explain. It seems like you're describing someone who I would think of as being hired to fulfill a COO's position rather than CEO. CEO I think of in terms of setting business strategy, hiring critical executive management, those very high-level decisions which appear to have been made for the Company already. Whereas, I think of a COO as someone who steps in to actually execute a plan that's in place. But, maybe clearly I'm not in on your conversation, so I don't know how you're thinking about it. But, could you elaborate a little bit about your thinking behind this role?

Sure. I -- maybe it's one of the reasons that I'm in transition. I think in terms of detail, I think in terms of operation, so I'm probably focused on that more than I would be on the vision and the strategy, the mission of the Company. But, I believe it's very important. I believe the person we are hiring will be a CEO, and I believe as the CEO they will chart the course in terms of strategy and vision and the mission of the Company, but I probably have the tendency to talk about the operational specifics, so I apologize if I have confused anybody. But, no, we are clearly looking for a strong CEO who can embrace what we have accomplished, take a look at what our current trajectory is and our opportunities are and help guide the Company as they see fit and involvement from me and the Board of Directors will also provide a level of oversight, but we are looking for somebody to be a CEO and not a Chief Operating Officer.

All right, I understand that. Does that mean we should think of the Company's strategy currently has a placeholder or do you think it is going to bear kind of like test in time. I think you have got an excellent strategy myself. I think it sounds like there are some issues in some of your businesses with respect to understanding how much time it gets -- to get certain things done; but it seems like from the strategy you have got is, witnessed by the ranking you've got in this article you cited early in the conference call, is just terrific and I would -- I'm just wondering if we should just think of this as an interim energy in limbo or something that we can hang our hats on?

Well, that's a very good question. Obviously either way I answer it, it probably raises some specter of doubt, but I think the current strategy is good. I agree with you there. I think we've spent a lot of time and energy in aligning the Board and executive management as well as outside experts. We've done I think a pretty thorough job of crafting our strategy. So we feel good about it; but on the other hand, when you bring in a new CEO, I think you have to be careful in making sure that that strategy is still open to be improved and I'm looking for -- I think the Board is looking for a candidate who can take a look at the strategy and either embrace it or improve it, so that we all believe that what we end up doing is something better than where we are currently at. So I look at it as very positive, but I -- and I do like the current strategy, but I'm hopeful that the new CEO helps us develop even a better strategy.

All right. Thanks, Vic.

Thank you, Lee.

All right.

Your next question comes from the line of [Steven Carleschi].

Hi, Steven.

Actually, it's [Rick]. My call was already asked and answered. I just couldn't figure out how to get out of the queue; but, since I'm on, I might as well add to what Alex said. I think you've done a fine job and perhaps a good use in getting your buyback started would be to take him out of his stock, the earlier call.

Rick, I appreciate the comment. Thank you very much.

You now have a follow-up question from the line of Chuck Shivery.

Yes, Chuck.

Yes, hi, Vic. The presentations that you put together for the investment analysts, you guys go up to New York and give them the road show per se. I know that other small-cap companies of your size, a lot of times go, even if it is a downgraded version, will put a presentation like that up on the Web site. Is there any way that -- that may go a long way towards answering some of the questions the investors have. What do you present to the analysts in terms of full disclosure? It shouldn't be that difficult to put up on the site.

Well, I'll answer that one. We are actually in the process of doing that. The last couple of trips I made out East, quite a few of the investors I met made that very same comment, so we are in the process of putting it on. It is just taking us a little bit of time, but it should be on pretty soon.

Okay.

I'll just add. I completely agree and we really support that. We want to provide more information. We try to do out best but I think that's a great idea and you'll see the corporate presentation online and we'll do our best to maintain it.

Okay. And if Kiosk is still a partner, then if somebody can look at the Web site and put them back up because, just because we don't have all the information, anything like that becomes subject to suspicion as to why they are not there?

I agree. I'll personally look at it.

Okay. And then finally, just -- I don't know if you know this or not, but -- and I'm not saying your in discussions with Apple -- but companies like Apple are very, very suspicious of any subcontractor/supplier announcing anything prior to, so I know you haven't said that before on the phone, so I'm kind of saying it for you, is some of these OEMs, if you get in front of them, they'll slap you and I know that Apple is one of the ones who have done that in the past with a number of suppliers. So, like I said, you haven't said that, so I just threw it out there for you.

Well, thank you, Chuck. We do try to obviously maintain the best relationship possible and there are some licensees that are probably more attuned to that issue than others, but we really do respect the partners. We want a long-term value proposition and we are not about to get in front of their news, so I appreciate the comments.

No problem. Keep up the good work and hopefully I will be able to get up to Gaithersburg and see if I can maybe get a tour of the Sony there.

We'd be happy to host you there.

All right, thank you.

All right.

Your last question in a follow-up question from the line of Bernie Brown.

Yes, just wanted to follow up real quick. I'm sort of thinking that the second half of 2008 is where I want to focus right now. I know you can't give guidance, but did that sound reasonable?

All right, yes. Based on our own internal projections, based on the continual wins that we have with our partners, I would expect revenues to pick up and grow in Qs three and four. So, yes, we expect revenue to grow throughout the year; we expect actually a very good year for '08. Unfortunately, I am not in a position to give you any specific guidance, but we are optimistic and we are working very hard to do the best we can.

Okay. The casino gaming aspect, is that retrofit or for newly opening casinos? I mean what's the percentage breakdown there?

Well --

As far as what's your target.

Yes. So the way you asked the question, a little bit different. The -- it isn't necessarily the retrofit of the casino. I think every casino that has these devices whether they are bar top amusement or slot machines or video games of any type, they are all candidates for touch screen and, therefore, Immersion's TouchSense technology. The technology could be integrated in existing machines on a retrofit basis, but I would say that you should really focus on the new machines that would be installed in existing or new casinos. That's where the biggest value is and I think that's the focus that (inaudible) is on the new machines as opposed to retrofitting old machines.

Okay. And finally, just a comment as far as these messages boards, the comments are not necessarily indicative of what everyone thinks. I do not agree with them and I appreciate the candor you've had in this call. Thank you.

I appreciate the comments, Bernie, and may be just an overall statement. I appreciate people have opinions and I'm willing to continue to improve. We are focused as a Company. I think I'm doing the right thing, can't keep everybody happy, other people have different views, but I think in general we are confident we are doing the right thing. So we'll stay the course and we'll do everything we can to keep growing the Company and adding value for the shareholders.

Very good. Thank you.

Even if I can't keep everybody happy.

Right. Okay.

At this time, there are no further questions.

Okay. Well, thank you very much for your participation on today's call. We, as I said, appreciate your interest in and your support of Immersion. Thank you and good afternoon.

This concludes today's Immersion Corporation quarterly results conference call. You may now disconnect.