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Immersion Post-HTC Settlement: Why No Increased Guidance?
- On Monday, Immersion Corporation announced a settlement and license agreement with HTC Corporation that avoided the start of the court case due to begin the same day.
- HTC will pay an undisclosed amount of compensation for prior shipments and an additional undisclosed amount of compensation for a license to continue to sell devices with Basic Haptics.
- Investors expected Immersion to take the opportunity given by this settlement to announce increased 2015 guidance - management had clearly indicated that existing guidance didn’t include any revenue from HTC.
- Because of this lack of increased guidance, the market may be now overreacting negatively and assume that the settlement was relatively poor for Immersion.
- We believe there are accounting reasons that kept IMMR management from increasing guidance and that investors may get a better understanding of the new deal after Q1 results.
Immersion Rides The Roller Coaster
- Immersion investors experienced several volatile sessions in the last few weeks, as the stock moved on news and speculation linked to 2015 guidance, Apple's haptic implementation, and the HTC trial.
- The HTC settlement should remove some uncertainties linked to the possible outcome of the court case.
- This may be an appropriate time to summarize some of the recent events and try to read beyond the headlines and the market erratic behavior.
Immersion Files To Overturn The Invalidity Of 3 Patents In HTC Case
- Readers beware: some boring but relevant legal staff ahead, as Immersion moved for reargument on HTC’s motion for invalidity of IMMR’s ‘720, ‘181 and ‘105 patents.
- In his Markman ruling, the judge granted HTC’s motion for invalidity of three key IMMR patents on the basis that Immersion provided no evidence of the timing of the filing.
- Immersion lawyers argue that the burden of proving that the ‘846 “patenting” occurred before the patent applications were filed should remain on HTC and not the opposite.
- The declared invalidity of three patents in the HTC case has been perceived by the market as a big question mark about Immersion’s IP strength as a whole.
- For this reason, we believe that following closely what is happening in court may be key to forecast which direction Immersion’s stock will take.
Immersion Vs. HTC: Which Company Is Winning In Court?
- Immersion experienced a very volatile session on Wednesday as investors started digesting the first decisions taken in court regarding its lawsuit against HTC Corporation.
- The judge denied HTC's summary judgment argument that it did not infringe two of Immersion's patents - a clear positive for IMMR.
- However, the judge also invalidated three other Immersion patents involved in the lawsuit, and limited damages on one claim to post 2/2014 - a negative for IMMR.
- We still hope that a settlement might be around the corner, and that the Markman hearing may act as a catalyst for reaching it sooner than later.
Telecity Group And InterXion Merge To Take Leadership In Europe
- Telecity Group Plc and InterXion have announced a non-binding all-share deal that will create a clear leader in the network-neutral European data center market.
- The deal is expected to be earnings neutral in the first full year and earnings accretive thereafter - total synergies are estimated at £600 million ($900 million).
- Shares in both companies rose after the merger was announced.
- The deal is a positive for both companies, although the new combined entity will still lack a global footprint and will have to rely on partnerships to reach other markets.
Jamba Adds 2 Activists To Its Mix
- Last week, Jamba announced that two activist investors, Engaged Capital and JCP Investment Management, were each given a seat on the company’s BoD.
- These two investors own in excess of 10% of the company (Engaged Capital: 8.2%; JCP: 2.3%).
- Engaged Capital had already been pushing the company to franchise most of its company-owned units, and for major cost cuts.
- The market seemed to like the announcement, and the shares closed last Tuesday’s session up about 7%. A new 52-week high was reached.
- As a result of this activist push, Jamba could finally unlock some of its hidden value. It’s execution time, but the stage has been clearly set.
Immersion's Homeland Haptic Trailer Delivers Strong Metrics
- Courtesy of “Think with Google," some positive metrics achieved by Immersion’s Homeland haptic trailer campaign are now shared publicly.
- According to these data, the IMMR haptic trailer gained a click-through rate 5 times above the industry average.
- As tablets, phablets and smartphones become the new personal TV, Immersion’s content and media vertical may emerge as a positive catalyst for the company.
- Immersion has been very quiet in the last few weeks: we believe CES 2015 will help put haptics into the spotlight.
- Several other catalysts may be in front of the company in 1H 2015, reversing the recent share price drop following a disappointing quarter.
Jamba: The Good, The Bad And The Unknown
- Jamba Q3 2014 revenues of $58.28M missed by $1M and EPS of $0.03 (on a non-GAAP basis) missed consensus by $0.28.
- The company announced a $25M share repurchase program and reiterated its commitment to accelerate the transition to an asset-light strategy.
- Positive numbers came from company-owned same-store sales, that grew 3.7% Y/Y, and juice sales.
- 2015 guidance calls for G&A reductions of approximately 20% and the re-franchising of 114 company stores during 1H 2015.
- There was some good and some more bad news in Jamba’s Q3 report, leading to a big unknown: will management execute properly on its accelerated plan to profitability?
Immersion Delivers A Mixed Quarter, Guidance Narrowed To The Lower End
- Immersion Corporation reported Q3 2014 revenues of $12.1 million, lower than analysts’ forecast, and EPS of $0.08, beating consensus estimate of $0.07 by $0.01.
- The company narrowed guidance for 2014 to the lower end of management’s previous forecast.
- Immersion’s BoD increased the amount of the company’s authorized stock repurchase program by $30 million.
- During the conference call, management spent some time explaining why Immersion’s business is at different stages in different verticals.
- We will take some time to dig into Immersion’s numbers to put management’s commentary into the right context and try to understand if Immersion is running out of growth opportunities.
Immersion's Partnership With SomaTone Adds Another Piece To Its Mobile Haptic Strategy
- Last week, Immersion Corporation announced a partnership with SomaTone Interactive, adding another piece to its strategy to “make implementing haptics easy” for content producers.
- SomaTone is a clear leader in the casual gaming niche. The company produces sound effects, music, voice work and other audio services for video game companies.
- The two companies have been cooperating for years. SomaTone founder, Nick Thomas, joined Immersion - a testament to the potential of the growing consumer demand for “immersification” of digital experiences.
Immersion Launches Touchsense Engage: Showtime's Homeland Gets Mobile Haptic Ads
- Showtime is launching mobile ads to promote the upcoming season of Homeland which uses haptic technology.
- This represents Immersion Corporation’s first commercial ad campaign that widely uses haptics to increase viewer attention.
- Immersion’s first proof of concept campaigns will be key to evaluate the impact of haptics on buyer behavior - and the marketability and monetization of haptic mobile ads.
Update: Immersion Renews License With LG, The Stock Plunges
- Last week Immersion Corporation announced that it had signed a new agreement with LG Electronics, covering both Basic Haptics IP and the company’s TouchSense software.
- The news removed the uncertainty related to one of Immersion’s longer time partners in mobility - but the effect on the stock price has been negative so far.
- Immersion re-affirmed financial guidance for fiscal year 2014, leaving it completely unchanged: the market assumed that the LG deal was signed at lower than expected rates.
Apple's Taptic Validates Immersion's Haptic Technology
- Apple finally announced its much-anticipated wearable device – the Apple watch.
- Apple’s “most personal device ever” implements a “taptic engine” that aims to change the way people receive notifications and communicate.
- Tactile feedback, recognizably different depending on the interaction, is a key part of the Apple watch experience.
- We believe Apple’s taptic implementation validates Immersion’s IP and opens several opportunities to IMMR.
- We notice a significant similitude between Apple’s “real touch” messaging and Immersion’s 2013 tactile presence solutions.
Immersion Named 'Cool Vendor' By Gartner Both In Automotive Electronics And Asia Pacific
- Immersion Corporation has recently been included in Gartner’s “Cool Vendor” list in both their “Automotive Electronics, 2014” and “Asia/Pacific, 2014” research reports.
- Gartner’s “Cool Vendors in Asia Pacific” highlights companies that “provide "cool" solutions across a variety of industries and disciplines in the region”.
- Gartner’s suggestion: “IT leaders seeking innovation should consider how these vendors may help provide differentiation for their companies”.
- Gartner’s “Cool Vendors in Automotive Electronics, 2014” profiles three vendors only: Immersion is selected for its “innovative technology in the areas of human-machine interface”.
- We see this mention as a confirmation that Immersion is close to an inflection point in the automotive vertical, and expect haptics to be implemented in larger volume models.
Jamba Juice: System Comparable Store Sales Not Any More An Area Of Concern, The Stock Benefits
- Jamba Juice stock climbed 11% last Tuesday, the day following Q2 2014 earnings. Share have kept positive momentum throughout the whole of last week.
- Same-store system sales (SSS) were up 2.2%, reversing three disappointing quarters of negative to flat numbers.
- We see an inflection point because of SSS concerns disappearing: Jamba’s margin-rich business model back in focus.
Immersion: Stock Down 23% After Earnings Miss, Lowered 2014 Guidance
- Immersion Corporation’s stock price fell over 23% after the company announced lower than expected Q2 2014 numbers.
- The market reacted to the earnings miss as if the company hit a brick wall: this may not be the case.
- Given the company’s history of stumbling into many road bumps, we believe we could only face a longer wait before Immersion’s story finally unfolds.
- Negotiations with LG probably the main concern for investors. We estimate a potential impact of roughly $4 million per year, or more.
Immersion Corporation's IP Value As An Acquisition Target
- Immersion Corporation has over 1,650 issued or pending patents in the U.S. and other countries in the haptic field.
- Several of these patents are essential to implement basic haptic effects widely used in touchscreen smartphones, as recognized by Google in its settlement with the company.
- While we have always looked at the company for its long term potential, it may be time to evaluate if a buyout is possible and at what price.
- Which players could mostly benefit from owning the keys to the haptic world? The answer is in the smartphone sector.
Update: Immersion And Huawei Enter Into Multi-Year License Agreement
- Last Thursday, Immersion Corporation announced that it had entered into a multi-year worldwide license agreement with Huawei, the third largest global supplier of smartphones, according to IDC.
- This is Immersion’s first direct license with Huawei, and covers the company's haptic software, TouchSense 3000. Huawei had previously gained access to Immersion’s basic haptic through an IMMR chip partner.
- We believe this is just the first of a serie of new Chinese licensees for Immersion. Lenovo and ZTE may follow soon.
- The stock shot up 11% after the announcement - however, we believe the market still hasn’t properly figured out that the company has several other catalysts that may materialize.
- In this update, we will analyze the latest two events that contributed to lifting the stock from its 2014 lows: Huawei and a speculation about iPhone 6 implementing haptic technology.
Immersion Q1 2014 Results: A Story Awaiting Some Catalysts
- Immersion Corporation recently reported Q1 2014 results, which were basically in line with consensus.
- Absent any unexpected news at the conference calls, the market’s reaction has been flat to negative – the stock remains in the $10 range.
- Y/Y performance probably better than at first look once a onetime benefit in Q1 2013 is excluded.
- PS4 a positive catalyst to Q1 2014 numbers, we estimate about $2 million in additional revenues from Sony.
- Investors are left waiting for some catalysts that should represent a new inflection point for the company and its stock: here is a short list.
Microsoft Completes Nokia's Acquisition: Expect A Significant Write-Off, Mitigated By A Tax Advantage
- Last week, Nokia officially completed the $7.5 billion sale of its handset division to Microsoft.
- Simultaneously, Microsoft reduced Windows licensing fee to $0 for smartphones and tablet OEMs – ending a questionable “charge with equivalent in marketing support” strategy, initiated with Nokia.
- Microsoft's Satya Nadella decision to launch a version of Office for the iPad, 52 days into his tenure as CEO, marks the transformation of Microsoft into a different company.
- ‘Will this help push Windows?’ not a key question any more for Microsoft’s future strategies. Ballmer’s device and services strategy probably to be revisited.
- Nokia’s acquisition soon to represent a several billion write off, but the impact may be mitigated by complex tax considerations.
Immersion Remains Investors' Best Choice To Benefit From Haptics Growth
- NXP recently announced it has taken a stake in haptic feedback tech developer Senseg through a Series B funding round.
- Most headlines described Senseg as an “Immersion competitor” in the haptic field - however, we believe that Immersion can only benefit from the success of Senseg’s solution.
- NXP investment will “allow Senseg to develop a next-generation solution that will be small enough and inexpensive enough to penetrate the high-volume smartphone market”.
- Senseg’s technology, usually referred to as electrostatic friction, or ESF, is an unproven technology that has attracted several headlines but must still overcome key engineering issues.
- Immersion’s actuator agnostic IP, existing OEMs agreements, established developer support, and strong leadership in the space makes the company the best choice for investors willing to benefit from haptics growth.
Immersion Corporation: A Negative Market View May Turn Into A Buying Opportunity
- Immersion Corporation is trading close to its 52 week low.
- We believe one reason for the recent weakness is represented by a key fund exiting its position.
- We also speculate the fund’s decision is unrelated to the company’s performance, but linked to its fundamental view of the market.
- We remain positive over Immersion’s long term prospect and see a buying opportunity at this level, absent a market crash.
Jamba Juice Q4 Results: Back On Track?
- Jamba Juice reported Q4 2013 results that were better than consensus.
- During 2013 the company opened 52 new domestic units and 15 international store locations, all franchise-operated.
- Franchise and other revenues increased 19.7% due to the net addition of 75 new and re-franchised domestic and international units and solid increases in CPG and JambaGO revenues.
- After what were described as “atypical [Q3] results”, management guided for improved metrics and revenue growth that, thanks to the company’s asset-light model, should translate into strong bottom line numbers.
- Assuming the company can properly execute on its business plan, we believe Jamba is undervalued at the moment.
- Immersion Corporation's Story Finally Unfolding
- Nokia's Android Strategy Leading Customers To Microsoft Services, Unlikely To Lay The Groundwork To Create Future Lumia Owners
- Our List Of Questions For Immersion Corporation
- Galena Biopharma Issues Letter To Shareholders, And A Case Of Insider Seller's Remorse
- Jamba Juice And Bruegger's Bagels Co-Branded Stores: Whose Strategy? - The Company's Or The Franchisee's
- Google Dumps Moto: Microsoft's Strategy Questioned, Immersion Benefits
- Mercedes-Benz Fully Endorses Haptics
- Sony To Become Immersion's Next Growth Driver
- Apple's Keynote Announcement: Selling Software Is A Thing Of The Past