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- Immersion Corporation (IMMR) will be reporting Q4 and full year results this week on Thursday
- Management expects 2013 revenues to be in the range of $46 million to $48 million, an increase of between 43% and 49% over 2012 revenues of $32.2 million
- Investors will mainly focus on guidance for 2014, and future growth drivers
- In anticipation of the conference call, we put down several questions that summarize many potential catalysts for 2014 and beyond
Lenovo's acquisition of Immersion's licensee Motorola might speed up an agreement with the Chinese OEM
As a license to basic haptics is already part of Motorola's business practice after Immersion and Moto settled the patent infringement litigation pending between the companies, we believe that the timing of a direct license to Lenovo could be accelerated by the closing of the Google/Lenovo deal.
Potentially, given Lenovo's ambitions in the sector, the combination of Lenovo and Motorola could multiply by 5 or even 10 times the revenue stream that Motorola alone could represent for Immersion. Any comment?
Is there any color that the company can add about the business developments with other Chinese OEMs, that already saw a great win with Xiaomi?
The overall Haptic Touchscreens market is expected to grow at a CAGR of 41% from 2013 to 2018
According to researchandmarkets the overall Haptic Touchscreens market is expected to grow at a CAGR of 41% from 2013 to 2018.
Immersion Corporation is described as "the major haptic solution provider in the industry and it is found that Immersion covers about 95% of the overall market share in the haptic technology solution market".
Consumer electronics (mobile phones mainly) are the major application area for of haptic touchscreens. Thanks to its license agreements signed with most Android producers, Immersion has gained a large share of the market, and mobility represents well over 50% of the company's revenues.
Home/Office appliances are also expected to start adopting haptic touchscreens soon.
Haptic touchscreens and rotary knobs are also being increasingly adopted/launched in the automotive segment.
Can we put a tentative year close to these two verticals for starting contributing materially to Immersion's revenue streams? (our guess: 2014/2015, 2015/2016 respectively)
What could be their contribution to Immersion's revenue stream over the long term? (our guess: low one digit number for home/office appliances, but double digit numbers for the automotive vertical, given the relatively high per-unit royalty)
There will be 1 billion Android smartphones and tablets shipped in 2014
Gartner is forecasting that the number of smartphones and tablet computers shipped with Google's Android operating system will break the 1 billion barrier this year.
Can the company update investors about the share of the Android market that is licensing Immersion's haptics (both basic and advanced) right now?
Nokia, HTC recently settled their long-running patent battle - may be a sign of HTC willingness to be less distracted by ongoing legal battles
Can Immersion update on the timing of the trial against HTC? (to get a sense if an 11th hour concession of defeat by HTC could be coming soon - we assume the company will not comment on any other aspect of the ongoing litigation or settlement negotiations).
Sony's PS4 is up to a great start - financial implications for Immersion in 2014
Sony announced that "Globally … we've sold through more than 4.2 million units as of the holiday season, making PS4's launch the biggest in console gaming history.
In the US, PS4 was #1 in sales for next-gen consoles in January, nearly doubling the nearest next-gen competitor."
As a reminder, Sony exercised its option to license Immersion intellectual property for the DUALSHOCK®4 controller included in its PlayStation®4 console system.
What could be the financial implication for Immersion in 2014 from Sony's PS4 success alone?
Apple's and Google's recent move to introduce support for gaming peripherals may be a game-changing moment for some Immersion licensees
The recent announcements from Apple and Google introducing support for controllers and other gaming peripherals establishes the infrastructure to support a core gaming experience on mobile. And by core gaming experience I'm referring to mobile gaming on a big screen in the living room rather than on a touch screen. Our GameSmart initiative delivers an ecosystem of gaming controllers, mice, keyboards and headsets to complement the new operating systems.
Any additional color on the impact to revenues (absolute terms and timing)?
Global healthcare/medical simulation market poised to grow at a CAGR of 19.6%
According to MarketsandMarkets, the global healthcare/medical simulation market is poised to grow at a CAGR of 19.6% to reach $1.9 billion by 2017.
Among the prominent players in this market there are several existing licensees of the company, like Laerdal Medical [Norway], CAE Healthcare, a wholly-owned subsidiary of CAE (CAE) [Canada], Simbionix USA Corporation [USA] and Mako Surgical (MAKO) [USA], now acquired by Stryker Corporation (SYK).
As to Mako Surgical, could Stryker's acquisition represent a potential revenue growth driver for Immersion, in a similar way to Moto/Lenovo?
The Asian market is expected to witness a boost in demand for medical simulation products and services.
Given Immersion's success in licensing haptics to other verticals in the Far East, and the lack of Asian partners in the medical sector, is the company actively engaged in pursuing new licensing deals with Asian based corporations?
Conclusion, and a side note about wearable computing
Our list of questions for Immersion Corporation is nothing but an excuse to share some of our most recent diligence, and at the same time highlight to Seeking Alpha readers some catalysts that we believe might drive the company's growth in 2014 and beyond.
We hope that Immersion's management will take the opportunity to add some color on some of the points we've risen in its prepared remarks during the conference call.
One thing we're not afraid of is that sharing our questions may give Immersion the possibility to avoid a direct answer in the Q&A session, as we've already enjoyed management's ability to use understatement when asked the direct question and then deliver good news - as shown by one of our questions made during the company's Q2 2013 conference call [what it actually meant in Italic]:
Paolo Gorgo - Nortia Research
Is there comments you can make about where Immersion's IP stands as far as wearable computing? [i.e. will Samsung license haptics for its new wearable product?]
Victor Viegas - President and Chief Executive Officer
Yes we have been actively developing solutions in the wearable space. We see a number of different key market applications. One from a medical standpoint monitoring, body functions providing appropriate alerts and so on. So we see it as an extension of medical business and as you know for quite some time we have been active in developing solutions and generating IP. In addition there is also consumer uses for sports, health monitoring productivity and those also are areas that we've been actively involved.
So we have quite a bit of IP in the space. We have solutions that we're developing and dialog with companies who are building such devices. So we are feeling pretty comfortable that as wearables become a part of the common user interface on daily basis that haptics will have a meeting role and that Immersion will be able to monetize that opportunity.
Just a month later, here comes the official confirmation:
Immersion Corporation, the leading developer and licensor of touch feedback technology, today announced the Samsung GALAXY Gear, a wearable companion device, incorporates Immersion's TouchSense® technology as part the user interface, providing tactile notifications and alerts to communicate information to its users.
By the way, we still believe haptics represents a great tool for wearable computing tools, and expect good news in the future. We won't, however, be asking anything about new deals in this space, but just cross our fingers that Immersion will one day deliver new, may be unexpected licensees [the elephant in the room, Apple (AAPL)].
According to the latest edition of Cisco's Visual Networking Index, the potential size of the wearables market will reach 177 million devices in 2017 - with Android probably representing one if not the main OS, which is good news to Immersion: