Immersion Corp (IMMR) 2010 Q4 法說會逐字稿

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  • Operator

  • Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Immersion fourth quarter and fiscal year 2010 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions.

  • (Operator Instructions).

  • This conference is being recorded today, Thursday, March 10, 2011. I will now turn the call over to Ms. Jennifer Jarman of The Blueshirt Group.Please go ahead, ma'am.

  • - IR, The Blueshirt Group

  • Thank you. Good afternoon and thank you for joining us today on Immersion's fourth quarter and fiscal 2010 conference call. This call is also being broadcast live over the web and can be accessed from the Investor Relations section of the Company's Web site at www.Immersion.com. With me on today's call are Vic Viegas, President and CEO; and Shum Mukherjee, CFO.

  • During this call we may make forward-looking statements which may include projected financial results or operating metrics, business strategies, anticipated future products, anticipated market demand or opportunities and other forward-looking topics. These statements are subject to risks, uncertainties, and assumption. Accordingly, actual results could differ materially. For a list of the risks that could cause this, please see our latest Form 10-K and Form 10-Q filed with the SEC, as well as the factors identified in today's Press Release.

  • Additionally, please note that during this call, we may discussion non-GAAP financial measures. For each non-GAAP financial measure discussed, a presentation of the most directly comparable GAAP financial measure and a reconciliation of the differences between the non-GAAP financial measure discussed and the most directly comparable GAAP financial measure is available in the investor presentation section of the Company's Investor Relations Web site at IR. Immersion. com. With that said, I will turn the call over to Chief Executive Officer, Vic Viegas. Vic?

  • - President, CEO

  • Thanks, Jennifer. Thanks everyone for joining us this afternoon. Looking back, 2010 was a productive year for Immersion. As we executed on the opportunity to realign our business and strengthen the overall organization to better position the Company moving forward. As part of this process, we streamlined the Company to a predominantly licensing based model, transitioned certain medical product lines, right-sized our employee base and cost structure, concluded to law suits, and rebuilt our executive management team.

  • On the product and innovation side, we made numerous enhancements to our technology offering, added several new licensees and multiple verticals, and continued to build out the network of eco system partners able to integrate our technology into their product. We saw solid growth from the mobile market and exiting the year, Immersion's haptic solutions have been deployed in more than 200 million phones worldwide on a cumulative basis.

  • Our financial performance in fiscal 2010 is a clear indicator that our shift to a scalable licensing model is working. Revenues for the year of $31 million exceeded the high end of our guidance range as royalties and licensing revenue grew 64% over the prior year. We generated positive adjusted EBITDA for the year of $2.6 million. Net loss for fiscal 2010 was $5.9 million or $0.21 per share, a significant improvement over a net loss of $28 million or $1.01 per share in the prior fiscal year. As you've seen from our announcements over the past several weeks, we have some exciting initiatives underway that reinforce Immersion's position at the center of the haptic's eco system and make it more compelling for device manufacturers and developers to leverage our technology.

  • In addition, we are pleased to announce the nomination of two new members to our Board of Directors. In a few minutes, I will discuss these developments and the strategic direction of the Company as we move through fiscal 2011. First, I will ask Shum to provide a more detailed review of our financial results for the core -- fourth quarter and the year. Shum.

  • - CFO

  • Thanks, Vic.I'll start with fourth quarter 2010 results. Revenues in the quarter were $6.4 million, slightly below revenues of $6.9 million in the fourth quarter of 2009. Revenues from royalties and licenses were $5.4 million, up 35% from Q4 of 2009, primarily reflecting strong demand in the mobility segment.

  • Revenues from sale of products were $768,000, down $1.6 million or 68% from Q4, 2009, primarily reflecting the transition of certain medical product lines to CAE in the first quarter of 2010. Revenues generated from development contracts were $223,000 compared to revenues of $538,000 in the year ago quarter. Gross profit was $6.1 million, 95% of revenues compared to gross profit of $5.5 million or 79% of revenues in the fourth quarter of 2009. The increase in gross profit reflects the shift in business mix to licensing revenues, which accounted for 85% of total revenues compared to 58% of total revenues in the same period last year. As we look at our long-term model, we expect licensing revenues to grow at a percentage of our overall mix, driving gross margins even higher.

  • Cost of product sales in the fourth quarter was $314,000 compared to $1.4 million in the fourth quarter of 2009. Excluding cost of product sales, total operating expenses were $8 million compared to $10.9 million in the fourth quarter of 2009 primarily reflecting the transition of the medical product lines, reduction of head count from 141 employees to 91 employees, and other cost saving actions. The operating expenses of $8 million include non-cash charges related to depreciation and amortization of $840,000, and stock-based compensation of $980,000. Excluding these non-cash charges, OpEx was $6.2 million during the quarter and is expected to trend in the $6 million to $6.5 million range over the near term.

  • We have lowered our expenses related to corporate admin and legal; but plan to continue to invest in sales, marketing, and R&D to achieve our expected revenue growth. Net loss in the fourth quarter was $2.3 million or $0.08 per share compared to a net loss of $4.3 million or $0.15 per share in the fourth quarter of 2009. As you know, in addition to normal GAAP metrics, we use a metric called adjusted EBITDA to track our business. We define adjusted EBITDA as earnings before interest, taxes, depreciation, and amortization less share based compensation and other nonrecurring items such as internal investigation and restatement costs, restructuring costs, and discontinued operations. In 2009, adjusted EBITDA also excluded change in fair value of warrant liability.

  • Adjusted EBITDA in the fourth quarter was negative $144,000, compared to negative $2.1 million in the fourth quarter of 2009. Revenues for the full year of 2010 were $31.1 million, 12% over revenues of $27.7 million for fiscal 2009, once again reflecting strength in royalty and licensing revenues, which grew 64%; partially offset by a decline of 43% in product revenues, reflecting the transition of certain medical product lines to CAE as previously discussed. Specifically, revenues for full year 2010 included revenues of $3.7 million related to product lines that were transitioned to CAE; and as mentioned in earlier conference calls, $1 million of gaming revenues related to true ups. Excluding these items, revenue for 2010 from ongoing business was $26.4 million.

  • Gross profit for 2010 was $28.2 million or 91% of revenues compared to gross profit of $19.4 million or 70% of revenues in 2009. Operating expenses excluding cost of product sales were $33 million in 2010, compared to operating expenses of $50 million in 2009, a reduction of $17 million, primarily reflecting the transition of certain medical product lines to CAE, head count reduction, and other cost saving actions. Increase in other income was $272,000 in 2010, compared to $1.3 million in 2009, which included $377,000 of interest income attributable to the enforced judgment with Sony.The interest income related to the Sony arrangement was fully amortized by Q4 of 2009.

  • Provision for income taxes was $1.5 million in 2010 compared to a benefit of $310,000 in 2009. Taxes in 2010 are primarily related to withholding taxes payable in certain Asian countries and tend to rise in conjunction with the increase in business in those countries. Net loss in 2010 was $5.9 million compared to a net loss of $28.2 million in 2009. Adjusted EBITDA in 2010 was $2.6 million compared to negative $16.8 million in 2009, an improvement of $19.4 million.

  • Our cash portfolio including cash and investments was $61.2 million as of December 31, 2010, compared to $63.7 million exiting 2009. Cash used in operations was $1.8 million in 2010 compared to cash used in operations of $18.3 million in 2009. In early 2011, we collected several cash payments, that were originally expected in 2010. Our cash portfolio balance, as of today, is $66 million, approximately $5 million higher than our cash portfolio balance on December 31, 2010. Over the last 12 months, we've conducted a thorough review of our internal controls over financial reporting and implemented new processes, leveraging functionality in our Oracle DRP system to streamline the reporting and accuracy of our financial information. We are pleased to report that as a result of our efforts, we have remediated the material weaknesses identified in 2007, 2008, and 2009; and do not have any material weaknesses for 2010.

  • In terms of guidance for 2011, we expect annual revenues to be in the range of $31 million to $33 million, an increase from on going business of $26.4 million in 2010. We also expect to generate net income for the full year. Lastly, while we have not made any stock repurchases within the last two years, our Board of Directors intends to resume stock repurchase activity in fiscal 2011. Underlying its confidence in our senior management team and the Company's strategic direction moving forward. We currently have 31.6 million remaining under our authorized stock repurchase program. And, with that, I'll hand it back to Vic. Vic?

  • - President, CEO

  • Thanks, Shum. I will start by touching on a few recent developments. Today, we announced the nomination of Carl Schlachte and John Fichthorn for elections to our Board of Directors. We're pleased to have nominees of Carl and John's stature and experience stand for election to our board and are eager to have their expertise, business leadership and market knowledge, as we move to the next phase of innovation and growth at Immersion.

  • I'd also like to take a moment to thank our retiring board members, John Hodgeman and Emily Ligget, who have been an integral part of our strategic business transformation through their many years of service. Moving on to developments on the product and technology front. In December, we announced that we hit a milestone of 500 patents issued, bringing our worldwide portfolio to over 1,000 granted and pending patents. The most recent additions are directed at improving and broadening the control of haptic feedback for a variety of touch screen devices and enabling next generation haptic experiences for consumers. This combination of technology and user experience innovation aligns with our multi-pronged system level approach to haptic, where we are continuously evolving our technology while also inventing new contacts in which users benefit from haptic.

  • Last month, we executed a licensing agreement with Bayer Material Science or BMS for short. BMS is a technology provider in conjunction with its affiliate, Artificial Muscle. This agreement allows BMS to bundle an Immersion patent license with its actuator providing a license solution to its customers. This includes BMS' basal reflex actuators for mobile phones and gaming devices. The first products of which are scheduled to be launched this quarter.

  • While the underlying technologies that go into creating haptic sensations continue to evolve, there are many partners in the ecosystem such as BMS that require Immersion's technology and software to realize a full solution. With our software controls and development platform as a hub, Immersion is well positioned to work with an array of underlying actuator technologies to suit individual device requirements. We also recently extended and expanded our license agreement with Alps Electric, a very large Japanese manufacturer of high quality electronic components for the automotive and other significant markets. The revised agreement extends the relationship through 2016 and broadens coverage to a diverse range of products within the automotive market.

  • In November, we entered into a reseller agreement with Tastitalia, a premier seller of high-tech user interfaces headquartered in Italy. Tastitalia is integrating our TouchSense 1000 and 2000 technology into its Tast haptic touchscreen and display unit, which are targeted for the industrial, medical, automotive, and aerospace markets. Immersion has embarked upon a very exciting path in 2011 with the recent launch of our new motive haptic development platform. Our market research studies continue to confirm that meaningful tactile feedback is integral to touchscreen enabled smart phones and that the integration of haptics dramatically improves the usage and appeal of consumer devices. However, up to this point, the greater adoption of haptics and deeper utilization of OEMs and developers has been hampered by the lack of an easy way to integrate effects across the user interface and application.

  • Today's haptic implementations provide critical feedback for typing and touch confirmation in touchscreen phones and tablets, but the true promise of haptic lies in delivering an HD haptic experience that allows for consistency throughout the user interface, personalization and customization; and rich and compelling effects for third party application. When we refer to HD haptic experiences, we're talking about three key elements working in sync to provide a much more enhanced user experience. One, actuators with Immersion's embedded control software to create rich and nuanced haptic sensation.

  • Two, system level software that integrates haptics easily and consistently into the device's user interface. And, three, application level software, for customized and context appropriate haptic effects. Leveraging these three components and, as part of our on going strategy to deploy higher performance haptic solutions, Immersion is enabling HD haptic experience based on both high fidelity and lower fidelity underlying technologies and across all of our mobile offerings from our TouchSense 3000 to our TouchSense 5000 series. With the introduction of the moto development platform, Immersion is automating the integration of haptic into the operating system and mobile application, making it much easier for OEMs and application developers to create rich, engaging user experiences based on Immersion's technology.

  • As of today, Motive is available for the fast growing platform Android platform and is capable of supporting both hand sets and tablets. To give you a quick overview, the platform is comprised of two key elements, the motive integrator for OEMs, and the motive SDK for application developers. The motive integrator offers three unique modules to provide build time integration options for mobile device OEMs. The UI module integrates haptics into the operating system's user interface within a matter of minutes eliminating engineering cycles and creating a superior user experience both in the UI and in down loaded applications. Users can then adjust or personalize haptic effects. OEMs can also use the theme managers to select from a list of haptic themes that can be customized to create a distinct and differentiated experience for consumers.

  • Finally, the reverb module automatically inserts haptic feedback into applications not optimized for haptic by translating audio data into effects. Examples include a sub wolfer effect in applications for video and music play back or a down loaded first person shooter game where the user feels the explosions and game play in their hand. On the developers side, we are offering the motive SDK. This set of design tools includes libraries with over 100 predesigned effects, sample codes, reference documentation, and a conversion layer that allows developers to easily and quickly incorporate specialized haptic effects into their applications.

  • One of the key aspects of the motive SDK is the ubiquity it offers to the development community.Leveraging our extensive expertise in haptic's technology, Immersion has been able to develop a platform that optimizes haptic effects across all Android hand sets. As we know, all hand sets are not created equal. Many of them utilize different underlying actuator technology, and some use Immersion's touch sense embedded control software while others do not. The motive SDK is a single tool that developers can use that will optimize haptic effects across all hand sets including those without Immersion's underlying embedded control software.

  • While hand sets that utilize our TouchSense technology will experience higher quality effects, the motive SDK enables haptic effects to play across the entire family of Android hand sets. This approach gives developers a single platform they can adopt without worrying about device compatibility or the complexity of code fragmentation, which we hope will increase adoption of the platform.Additionally, this approach creates the potential for an additional revenue stream for Immersion as we extend our tools to mobile applications developers. As OEMs continue to look for ways to elevate their products within a crowded competitive landscape, the ability to use Immersion's platform to generate more of the haptic based uses and applications that appeal to consumers provides an important point of differentiation. The reaction by OEMs has been very positive thus far and our sales team is energized as we are beginning to see elevated levels of interest and design activity across our various offerings.

  • In closing, 2010 marked a significant inflection point for Immersion, as the traction and focus within our royalty and licensing business enabled us to transition to a streamlined high margin model leading to revenue growth and profitability. In 2011, we expect to benefit from another year of solid double digit revenue growth from our on going business, and to achieve net income for the next -- for the first time since 2007. We are focused on delivering cutting edge haptics and user experience solutions through a system level approach and further building on our position as the go-to partner in the space. Our new motive platform is igniting a new level of excitement around the potential for haptics to transform the user experience within consumer devices among both existing and potential customers.

  • We are more confident than ever that Immersion is at the center of a tremendous opportunity, and that we have the right approach in place to pave the way for the Company's future growth. I'd like to express my deep appreciation to our Board of Directors, employees, customers, partners, and shareholders for your steadfast support of Immersion over the past year. We will now open up the call to your questions. Operator?

  • Operator

  • Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions). One moment, please.

  • Our first question comes from Jeff Schreiner with CapStone Investments. Please go ahead.

  • - Analyst

  • Thank you for taking my questions and congratulations on a solid year.

  • - President, CEO

  • Thank you.

  • - CFO

  • Thanks.

  • - Analyst

  • I wanted to just start. I have got to get this one in, but Shum, you gave guidance for the full year of $31 million to $33 million. What kind of revenue guidance or range could you give us more for maybe the March quarter.

  • - CFO

  • We weren't planning to give any quarterly guidances, Jeff, we will just guidance for the full year and we also give guidance that we would have positive net income.

  • - Analyst

  • Okay. And then I mean maybe to follow up on a statement you made. You look at the model and you are seeing the gross margin see a solid ramp through calendar year 2010. And just wondering how much further can this gross margin level get to?What is maybe the internal target here for gross margins during calendar year 2011?

  • - CFO

  • You should use the run rate that we've had in the last two quarters and we expect gross margin -- total gross margin of between 90% and 95% going forward.

  • - Analyst

  • Okay. That's helpful. Just want to talk about this MOTIV real quick. Very interesting technology, Vic. You stated it could be used across Android, I think that was stated in the press release. Could you help us understand just on a basic sense, is this something you feel might be able to bring in new licensees, i.e. guys who are making Android phones right now that may have some less than TouchSense level haptics type technology in their phones, and you might be willing now to offer this type of product to try to get that business. Can you kind of position MOTIV for us and how you look to take it to market with the Android players?

  • - President, CEO

  • Sure. Absolutely. We recently announced and launched the product at the Android developer conference, well attended, a lot of excitement that came out of the show. So the Android development community, I think, appreciates the value, the benefits, the ease of use of our tool. So we are really excited with the feedback we have already. As these developers incorporate haptic effects in their applications, those applications will play with a very high level of fidelity on a TouchSense enabled hand set obviously. But we are also opening up this capability so that same application will play very well on a nonTouchSense based phone based on the Android operating system.

  • So we think that the best way to expose customers, prospects, partners, to haptics is to get it in their hand. If you are a user, a customer with an Android based phone without TouchSense, you will be able to get that experience with that application; and obviously, you will look for richer applications from other partners, you'll look for that experience throughout the operating system and throughout the various functionality. So we see this tool as a great way to introduce haptics to a new community and to incent them to move toward working closely with Immersion incorporating our TouchSense as well as the MOTIV platform across all these Android hand sets.

  • - Analyst

  • Just to clarify on that. Let's say I want to come use it but don't want to use TouchSense, is there going to be a different compensation to Immersion between a company who licensed the full TouchSense platform and someone who maybe takes a MOTIV license?

  • - President, CEO

  • No. I think that we have our standard license agreement, which is being down loaded every minute now by developers. The pricing for this is clear at 5% of gross receipts, and it is regardless of whether it is an application played on a TouchSense hand set or a nonTouchSense hand set.

  • - Analyst

  • Okay. You mentioned the artificial muscle win with BMS. That was certainly a solid win, and congrats on the win and announcement there. Was wondering though how that -- if you are seeing any impact from a competitor who also has claimed that as a win, and that they're shipping products to that company? And just wondering if you could maybe step back, Vic, and talk to us now about how Immersion's viewing its IP portfolio versus the current haptic world or the world we are in versus maybe how you might have viewed it if there has been any change, let's say back in 2007 when things were a little bit different?

  • - President, CEO

  • Well, I think our patent portfolio continues to strengthen based on the innovation of our people and the target markets that we are operating in. So I would say that our IP is getting stronger by the day. But in addition to IP, I think that some of what we have talked about here with the MOTIV SDK and the MOTIV UI and integrator, I mean these are tools and products that really begin to establish Immersion as the leader, the go-to partner is what we have called it. It really begins to separate us from so-called competition, let's say.It is hard to launch a haptic solution without the support of the development community and the tools that make it easy to integrate for OEM.

  • So with that said, our relation with AMI couldn't be any better. They are innovators in an area of technology called electroactive polymer. If anything, that technology probably is an alternative or a competitor to spinning mass motors or other type of actuation technology.We try not to differentiate between the merits of those types of actuation technologies. We are a bit agnostic.

  • We work closely with them as part of the eco system that we like to cultivate, and we really hope that they're quite successful. You alluded to maybe a competitor, I don't know that -- clearly AMI is not a competitor or VMS there. But, if there are companies that provide certain componentry, maybe control circuitry or chip technology that might drive these motors; again, I wouldn't see them as competitive. I see them as providing an enabling capability to our partners. So I think that relationship is clear. Our IP is strong, our tools are strong. And we don't view this as a competitive situation at all.

  • - Analyst

  • Thank you very much. I will step off gentlemen.Thank you for taking my questions and let others get questions in.

  • - President, CEO

  • Thanks, Jeff.

  • Operator

  • Thank you. Our next question comes from the line of Darice Liu with Brigantine Advisors. Please go ahead.

  • - Analyst

  • Good afternoon.

  • - President, CEO

  • Hi, Darice.

  • - Analyst

  • Hi. Can you provide an update on what's going on with your IC controller partners, Cypress, Atmel, Renesas, and when should we start the joint product introduction to the market?

  • - President, CEO

  • So we continue to be actively engaged with them. We continue to bring them design opportunities. They bring us into certain accounts to begin developing solutions for their customers. As I understand it, they have products that incorporate their touch controller technology with our Immersion haptic capability. And that those are being show cased, presented to their customers. In terms of design wins, I don't have anything today that I can announce. We would wait until the customer actually launches a product or allows us to communicate that design win. But we have a lot of activity going on, and we are pleased with those relationships.

  • - Analyst

  • So do all three of those partners, Cypress, Atmel, Renesas, they all have incorporated their controller with your haptics product?

  • - President, CEO

  • I know for sure that Renesas has a shipping product. I do believe that Atmel and Cypress both are promoting an integrated solution to their customers. Now, whether they call it a distinct product and treat it as a separate SKU, I don't know that for a fact. But I do know that there are working prototypes and demo units that they're promoting on our behalf and they're having quite a bit of interest from their prospect.

  • - Analyst

  • Okay, very nice. There's been a lot of focus on the hand sets but the big topic at CES tablets. Can you talk about your opportunity and your pipeline activity for the tablet market?

  • - President, CEO

  • Sure. Again, hopefully it came across, the enthusiasm we have around the MOTIV platform and it is also very appropriate for the tablet market. So, we have activity directly with prospects, customers. We've had success with the Galaxy tab from Samsung, Toshiba has had quite a bit of recognition and success with the Libretto line, and I believe has announced a family of products around that type of technology. So we are seeing that success.

  • We are working closely with other partners, as well as the chip partners who are also actively working towards design wins at these tablet manufacturers. So lots of activity, lots of interest, I think MOTIV has given them an easy integration into the Android OS that's used on the tablets. So we are pretty confident that we will see quite a few partners that we can announce with products in the market in 2011.

  • - Analyst

  • So I guess following up regarding MOTIV, and bringing the platform to the market, clearly we are still many the beginning stages with development and building a library. When do you foresee generating revenues from the product?

  • - President, CEO

  • Clearly in 2011 and I would say over the next few quarters, we have got a number of different development initiatives that we think can yield products in the market. So within the next couple of quarters I would say.

  • - Analyst

  • Okay. And just one quick housekeeping question for you, Shum, what should we be modeling amortization in fiscal 2011?

  • - CFO

  • Amortization, good model for the year would be of the order of $900,000 to $1 million.

  • - Analyst

  • Okay. Thank you very much.

  • - President, CEO

  • You're welcome. Thank you, Darice.

  • Operator

  • Thank you. Our next question comes from Charlie Anderson with Dougherty & Company.Please go ahead.

  • - Analyst

  • Good afternoon, everyone. Thanks for taking my questions and sounds like an exciting year.

  • - President, CEO

  • Thanks, Charlie.

  • - CFO

  • Hi.

  • - Analyst

  • So I want to start with just the guidance on the top line, the $31 million to $33 million I am just kind of curious what kind of assumptions you guys are making for tablets. You have got off to a good start here with a few name brand tablets that are in the market. Did you assume much in your guidance for '11 on that or are you staying pretty conservative there? If you can just give us a little color there. And also I'm kind of curious what you are thinking in terms of new licensees either coming from the MOTIV or elsewhere and how that is factoring into the guidance. That would be helpful. Thank you.

  • - President, CEO

  • Sure. So Charlie, 2011 on the tablet side, I think our focus really is on design wins and launching products with our customers. We do not anticipate significant revenues from those. It is still too early to say which will be successful and which will be average, let's say. So the guidance does not include much revenue, very, very modest amounts for a tablet win. On the OEM side, the current forecast does not anticipate any significant design wins with new OEMs, although our efforts are to close a number of new OEMs and we are optimistic that that will be achieved. But the forecast and guidance anticipates virtually no revenue from new OEMs on cell phones.

  • - Analyst

  • Got it.Then just in terms of supporting MOTIV on the operating expense side, there's different versions of Android that come out every once in a while, how are you doing that? Are you doing that internally or are you doing that with contract workers or how that impacts OpEx would be helpful.

  • - President, CEO

  • Yes, most of the effort, in fact I would probably say almost all of the effort is going be internal. We, along with I think most others are probably anticipating that the honeycomb for the tablet market and the gingerbread and then the follow on is called ice cream. So we are working towards tracking those product launches. And we have got teams that are ready to work on those solutions. The heavy lifting, I think, a lot of that has been done, and so as we see new versions launched, it is not obvious to us that it will be a significant investment. It is really included as part of the cost estimate that Shum's given you of I think $6 million to $6.5 million for OpEx.

  • - Analyst

  • Great. And then, Shum just a housekeeping question for me then in terms of the income tax provision in '11 to get to your positive net income, what should we think about there?

  • - CFO

  • The income tax for the full year should be about between $1 million to $1.5 million.

  • - Analyst

  • Great. Thanks so much.

  • - President, CEO

  • Thanks, Charlie.

  • Operator

  • The next question comes from Matt Bendixon with Craig-Hallum Capital. Please go ahead.

  • - Analyst

  • Hi.

  • - President, CEO

  • Hi, Matt.

  • - Analyst

  • Just in terms of extending that Alps Electric deal for another four years, do they represent a sizable amount of your automotive licensing, and are the economics on that deal pretty similar?

  • - President, CEO

  • Yes, they're a very important partner, customers of ours for actually quite a few years. They have achieved quite a few design wins and are significant partner for ours in the automotive space. The agreement extends the term and it expands to cover a broader set of rights within the automotive space, and I would say the financial terms are very similar to the existing or the prior terms in the prior agreement.

  • - Analyst

  • Great. Then just lastly I was wondering for the quarter, what percentage of royalties and licensing did the chip partners contribute?

  • - President, CEO

  • I think the last time I looked I think it was right around 10%, maybe somewhere between 9% to 10%.

  • - Analyst

  • Okay. Perfect. Thank you.

  • - President, CEO

  • You're welcome. Thank you.

  • Operator

  • Our next question comes from Aaron Husock with Lanexa Global. Please go ahead.

  • - Analyst

  • Great. Thank you for taking my questions. If you are guiding 2011 total sales at the midpoint up 21% apples to apples, if you kind of look at that in terms of mobile, gaming and the general Touch, can you explain for us how fast each of those segments you think will grow? Or which will grow meaningfully faster or meaningfully slower than the total of 21%?

  • - CFO

  • We are looking at, as you say the midpoint growth of around 21%. The MOTIV is slated to grow around 20% to 25%. And there is slightly slower growth in the chip business, which as you know started from nothing last year, and had a big ramp up this year.

  • - Analyst

  • Okay. And what about gaming?

  • - CFO

  • Gaming, again will grow -- will be flat to about 5% to 10% of growth.

  • - Analyst

  • Okay. And then, if you just look, I mean on MOTIV, it seems like MOTIV was well received at Mobile World Congress. You have touched on how fast it can come to market a little bit. But is it something where existing Android hand set vendors who have models that are already relatively far along in the design process, how easy is it for them to incorporate MOTIV in, kind of in the last few months of hand set design or is it something that they have to be contemplating much earlier in the life cycle of a hand set design?

  • - President, CEO

  • I think in the TouchSense, customers that already have TouchSense, the MOTIV integration is extremely easy. It is-- if you are talking I think as we said minutes. So, the quickport, it is available and it provides a rich experience throughout the OS. So if you are a TouchSense customer I think you have an easy integration.

  • If you are an OEM that is not an existing customer, then MOTIV will not really provide you -- it is not available. It requires the underlying TouchSense technology to take advantage and drive the MOTIV. The one advantage or the one area I mentioned is if the developer is using our SDK, then the resulting application would play quite effectively on a non TouchSense hand set.

  • - Analyst

  • Okay. So is this something where if we look at your maybe your Korean customer base where there's a TouchSense already as they launch new Android phones maybe as early as Q2 could we see some phones with MOTIV?

  • - President, CEO

  • It is hard to really predict what their launch plans are and when they make decisions and their process. I think is it possible? The answer is yes because our solution's ready to go. Will it be embraced and through a QA process in time to launch within Q2? That might be cutting it short. But clearly the value of MOTIV is well understood by our partners and probably equally as important as the MOTIV capability is the further incentive and reenergizes discussions with non-customers because if they have an Android strategy, haptics, and broad and pervasive use of haptics through our MOTIV is something that they are quite keen to get access to.

  • - Analyst

  • Great. So I think at the end of '09, you told us that you shipped into 75 million hand sets in 2009. I know you like to talk about cumulative numbers, but can you give us a sense for how many units you shipped into 2010? Was it 100 million, 125 million?

  • - President, CEO

  • It was definitely more than 100. Specifically, I don't remember the exact number. I know that we are something north of 200 million, I think we are getting close to 230 million to 250 million. We are kind of in the ball park there.

  • - Analyst

  • One more for me, housekeeping. I thought in the prepared remarks you said gross margin will keep rising as licensing grows as a percentage of the mix. But then you talked about 90% to 95% is the right gross margin range. I would think --

  • - CFO

  • Yes. 95% is approximately the right range and as we grow and as our licenses become a higher percentage of total revenues, that should grow even slightly more.

  • - Analyst

  • Okay, great. Thank you.

  • - President, CEO

  • Thanks, Aaron.

  • Operator

  • Thank you. (Operator Instructions) Our next question is a follow up question from the line of Jeff Schreiner with CapStone Investments. Please go ahead.

  • - Analyst

  • Yes, sorry. I was just wondering, Vic, if you could talk to us a little bit in the context of when you are looking at the business today and what you have in front of you, where is the health of Immersion compared to when you left the Company a few years ago?

  • - President, CEO

  • Well -- I guess when I left, it was April of 2008, we had a considerable, larger cash balance. We had some early design wins in a number of the verticals that we're currently operating in. And we were focused on building out products, marketing, and sales teams. Fast forward to today, I'm extremely pleased to be working with, I think, a very good management team. I am happy to say that the management team, in my opinion is much stronger today than where it was some time ago.

  • I think that some of those early initiatives, I can remember when we launched the N330 with Samsung and kept our fingers crossed that people would like it and now 200 million phones later we are having I think a lot more success. We've also benefited, I think, from the transition to touch screens as an acceptable user interface where back in 2007, 2008 there was a question whether that would really be successful. So I think the health of the management team and the business are product offerings and the market receptivity and acceptance of touch screens, all of those I think are really exciting, strong drivers and has me really excited to be back and really happy to see where we are headed and to be able to provide guidance that we are profitable in 2011 is very satisfying.

  • Operator

  • Thank you. Our next question is a follow-up question from the line of Charlie Anderson with Dougherty and Company. Please go ahead.

  • - Analyst

  • Yes, hi. Just had to hop back in with one that I thought about. The $31 million to $33 million, Shum, is that when you say positive net income, could you do it at $31 million or do you have to hit the midpoint for that?

  • - President, CEO

  • Can I take that? This is Vic. We will do everything we possibly can to be profitable. So I believe the model even at 31, we should be profitable.

  • - Analyst

  • Perfect. Then I'm just curious also on mix of business in '11 between the three segments, if you could provide any color there, that would be helpful.

  • - CFO

  • The mix of business is not going to change that much, mobility will continue to be our largest segment followed by gaming and then you'll have a combination of medical, auto and chip partners.

  • - Analyst

  • Got it. Thanks.

  • Operator

  • Thank you. I am showing no further audio questions at this time. I will turn the call back to management for any closing remarks.

  • - President, CEO

  • Well, thank you everyone for being on the call with us today. We look forward to updating you again in our next quarterly conference. Have a great day.

  • Operator

  • Thank you, sir. Ladies and gentlemen, that does conclude the Immersion fourth quarter and fiscal year 2010 earnings conference call. We thank you for your participation and you may now disconnect.