Thomas White

www.thomaswhite.com November 13, 2009

Immersion Corp.

SELL

NASDAQ: IMMR, $3.85 United States

Upgraded 7/18/09

Thomas White’s Stock Rating The Thomas White quantitative stock selection model for the technology sector projects that over the next year an investment in Immersion should fall over 15%. It should underperform the market and underperform 90% of the stocks in its industry. This conclusion suggests taxable investors sell Immersion now and replace it with a stock we rank "most favorable."

Thomas White's Recommendation

BUY

Underperformance Expected

Most Favorable Favorable

HOLD

Neutral Unfavorable

SELL

Most Unfavorable

Current Recommendation (10/10/09) Previous Recommendation (7/18/09)

Most Unfavorable Unfavorable

Stock Classifications Region Sector Industry Asset Class Investment Style Risk Profile Rank Financial Quality

North American Technology

sales (W.C. turnover) is one method of identifying efficient management. Within this group, a high working capital turnover ratio increases the chance that the stock will perform well. Immersion has a working capital turnover ratio of 0.45 times against the group’s median of 1.56 times.

Business Model: Total Asset Turnover - Very Negative Tools that measure how efficiently a firm is utilizing its assets help our analysts understand a company’s structural advantages and the skill of its management. In this group a high sales to assets ratio (asset turnover) suggests stocks that will probably outperform their peers. Immersion has a total asset turnover ratio of 0.33 times compared to the group’s median of 0.74 times.

Valuation: Assets - Neutral Valuation analysis must consider certain areas in the company’s balance sheet. In this group we find that a lower price to total assets ratio is effective in signaling undervaluation. Immersion has a P/A ratio of 0.96 versus the group’s median of 0.96.

Valuation: Net Income (FY0) - Neutral

Thomas White's quantitative analysis rates Immersion a Sell. This historically tested industry-specified valuation model incorporates the following components to make a more accurate projection of the stock's future performance. As these factors are not weighted equally, the final rating may occassionally appear inconsisent with the pattern of factor scores.

As is common elsewhere, undervaluation is favored in this group. A key component in determining a company’s proper valuation is the P/E ratio. This P/E ratio uses an EPS that the company believes best represents its recurring earnings for its most recent fiscal year. These earnings may or may not be the actual GAAP earnings that the regulators require it to report. Due to irregularities, Immersion’s P/E (FY0) ratio is reviewed in the composite adjustments section.

NA

Valuation: Working Capital - Very Negative

Valuation: Net Income (FY1) - Neutral

NA

The balance sheet is composed of long-term and shortterm items. Working capital, which is the difference between short-term assets and short-term liabilities, represents the day-to-day capital necessary to manage the company. In this group, the valuation ratio price to working capital (P/WC) is effective in signaling undervaluation. Immersion has a P/WC ratio of 0.35 versus the group’s median of 0.22.

Undervaluation indicates the potential for long-term outperformance, although it does not suggest when it will occur. A company’s share price to its net earnings per share (EPS) is the most common ratio used to detect undervaluation. Because there are many versions of earnings, there also are many versions of P/E’s. This P/E ratio uses a forecast of EPS for the current fiscal year. Due to irregularities, Immersion’s P/E (FY1) ratio is reviewed in the composite adjustments section.

Computer Products Small-Cap Growth Above Average Risk Below Average

Company Fundamentals Market Capitalization (Millions) Price/Earnings Ratio Price/Cash Flow Ratio Price/Book Ratio Dividend Yield (Indicated) Net Profit Margin Return on Equity Debt/Equity Beta

Immersion Corp. is in Thomas White's small computer & peripherals valuation group. The factors explained below incorporate this group's historical valuation pattern, its accounting conventions and the buying and selling habits of its investor population. The company's fundamentals are first compared with its industry peers to confirm the accuracy of its financial ratios. The stock's rating is calculated using a multi-factor valuation framework, where the score reflects a formula weighted sum of a series of valuation factors. This disciplined approach produces a more thorough appraisal of the company's value relative to its industry peers.

Page 1 of 4

$107.6

1.43x Nil NEG NEG 0% 1.78

Valuation Model Rating: Sell

Working Capital Analysis: Working Capital Turnover - Very Negative In this industry it is particularly important that management is effective in managing working capital. Maintaining a below average ratio of working capital to

5-Year Monthly Price Range and 52-Week Moving Average logarithmic scale

52-Week Moving Average

December FY

50

20 10 5

2

2004 4 - 10 Price Range 23.8 Revenues (M) -0.91 EPS (Diluted) Nil Dividend Declared 0.06 Book Value/Share Prices: CY Financials: CY

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2005 5-8 24.3 -0.54 Nil --

2006 5-9 27.9 -0.42 Nil --

2007 7 - 21 34.7 3.71 Nil 4.38

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2008 3 - 13 36.5 -1.61 Nil 3.88

2009 2-6

41.1 -0.42 -2.70

TWI consensus estimates in italics

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Immersion Corp. NASDAQ: IMMR Thomas White's Recommendation

BUY

Most Favorable

HOLD

Neutral

SELL

Most Unfavorable

Summarizing Immersion

Favorable

Unfavorable

Current Recommendation (10/10/09) Previous Recommendation (7/18/09)

Most Unfavorable Unfavorable

A Valuation-Oriented Research Philosophy Thomas White believes that original research is the surest path to superior stock selection. Since most investors are shortsighted, they overvalue a company when its short-term outlook is rosy and undervalue it when times are discouraging. This cycle of exaggeration creates wide stock swings around a company’s actual business value. This behavior produces a never-ending series of investment opportunities.

Thomas White Quantitative Stock Ratings

Immersion Corp. develops, licenses and markets digital touch technology and products. It provides touch feedback and touch-enabling technologies that targets consumer gaming peripherals, consumer electronics, mobile communications and portable devices, and automotive controls. Further, Immersion has developed simulation technologies that can be used for medical training and testing. This is sold to hospitals, colleges and universities, nursing schools, medical schools, emergency medical technician training programs, military, medical device companies and other organizations involved in procedural medicine. The California-based company faces stiff competition from Logitech, Microsoft, and Medical Simulation Corporation. Immersion Corp.’s performance reflects the fact that it is a small-cap growth stock in the computer products industry.

The investment rating in this report comes from one of a series of quantitative models developed and improved at Thomas White International and its predecessors over 30 years. These stock selection models are designed to enable investors to focus their attention and further research on securities that may have superior return potential. We are proud that the model’s strong performance record has long assisted investors in making their investment decisions. Please note investors should not misinterpret this stock rating as a final recommendation; a thoughtful investment decision requires reviewing multiple research sources.

Page 2 of 4

breadth of its operating divisions, the quality of its working capital and its financial leverage. A stock’s variability reflects its weekly price movements over the last 7 years. 4% L-T Growth; Below Average Quality Immersion’s interim price direction and volatility is only partially the result of the company’s fundamentals. The strongest external influence is its position in the technology sector and the computer products industry. This area is noted for its above average sensitivity to the business cycle and for the wide swings in its stocks. Company specific influences relate to the variability of Immersion’s earnings and the characteristic behavior of investors that own it. We project it will grow with average persistence and at a long-term rate of 4%. Its overall financial quality is below average versus other firms. The investor-related influences in our risk profile model include the stock’s lack of dividend yield, its NASDAQ membership, its 44% institutional ownership, its market cap of $107.64M and its above average sensitivity to market moves (1.78 beta).

Loss Levels To Fall 74% The company reported March 31 interim earnings of $-0.28 versus $-0.10 the previous year. Immersion’s losses for the year 2009 are projected to decrease roughly 74%. Immersion has an Above Average Risk Profile Understanding Immersion as an investment means developing a clear picture of its risk profile as well as its reward potential. A risk profile describes the influences on a stock, which explain its particular pattern and level of volatility. Our risk ranks range from low (10%) to high risk (100%), with 50% being the average. Immersion has a risk rank of 70%. Unlike beta, a stock’s response to the market’s movement, our risk profile incorporates both business risk and investor driven stock variability. A firm’s business risk varies with the stability of its revenues, the

Thomas White ratings come from rule-based conclusions. A series of detailed financial ratios are used to calculate the relative value of a stock versus its peers in its industry. How is our stock selection approach different? We employ tailor-made valuation methods for each industry, asset class and country. For example, in the global banking industry we have designed unique valuation methods for large-cap U.S. banks, small-cap U.S. banks, Canadian banks, U.K. banks, European banks, Japanese banks, Australian banks, etc. The valuation models used are not just a simple combination of financial and market metrics. They represent a perfectly fitted glove that is designed to deal with the distinctive accounting, business, regulatory and investor behavior patterns in each region and industry. Thomas White seeks to maintain its rating accuracy by using over 190 unique industry-specific stock selection methods. As a global research and asset management firm, our professionals are continually improving the models, using their industry knowledge and long experience designing valuation techniques.

Relative Strength Rank (RS Rank): IMMR & the TWI Computer Products Industry Top Quartile

IMMR RS Rank in TWI USETS Universe TWI Computer Products Industry: Average RS Rank

Average

Bottom Quartile IMMR is a Small-Cap Stock, with a Growth investment style.

A rising line means large-cap stocks are outperforming small-cap stocks. A rising line means value stocks are outperforming growth stocks.

2005

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2006

2007

Independent Investment Research on the World's Capital Markets

©2009 Thomas White International, Ltd. PLEASE SEE PAGE 4 FOR IMPORTANT DISCLAIMER INFORMATION AND DEFINITIONS OF TERMS USED IN THIS REPORT.

2008

•

2009

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November 13, 2009

Immersion Corp. NASDAQ: IMMR Stock Classifications North American

Region Sector Industry Sub-Industry

Technology Computer Products Peripheral Equipment

52-Week Sector Performance Order Past Order (Mos. Ago) Current 3 6 12 1 18 20 20 2 3 5 14 3 1 1 11 4 4 13 19 5 16 10 7 6 2 3 3 7 9 6 15 8 10 9 16 9 13 14 12 10 20 18 9 11 19 19 17 12 17 15 18 13 6 8 5 14 5 7 13 15 7 2 2 16 8 4 4 17 14 16 10 18 15 17 8 19 12 11 6 20 11 12 1

Median Price Rel. St. TWI Sector Return Rank Metals 44% 23 Technology 29% 35 Retail 28% 36 Consumer Dura 28% 36 Chemicals 21% 41 Consumer Stapl 18% 44 Services 16% 46 Telecom 16% 47 Industrial 15% 47 Energy 14% 49 Capital Goods 14% 49 Forest Products 12% 51 Insurance 11% 51 Building 11% 52 Healthcare 5% 59 Utilities 0% 65 Finance 0% 65 Transport -4% 71 Aerospace -6% 72 Banking -22% 88

Regional Contrasts in Growth Outlook Widen Nov. 4, 2009 - Thomas White International Ltd -- At this point in the economic cycle, it is very clear that there will be sharp contrasts in the growth rates in different regions over the next year. The strength of the recovery in individual economies will continue to depend on the scale of stimulus programs being implemented, as well as accommodative monetary policies. Asia, excluding Japan, will likely see the strongest growth, followed by Latin America. Among the developed economies, the pace of growth in Japan and Europe are likely to lag the U.S. and Canada. Signals from leading indicators, including business sentiment surveys and asset prices, now suggest some caution being added to the economic optimism built up in recent months. After the robust gains earlier this year, the slowdown in incremental gains in some economic indicators is not unusual. Consumer sentiment surveys from different parts of the world remain mixed, and reflect the state of the labor markets and credit availability in the respective regions. Inflation remains contained and will allow central banks to delay interest rate hikes further, except in faster growing emerging economies.

Recovery in Earnings Growth Slows

financial services firms are finding the climate increasingly favorable even as commercial banks face challenges. Credit quality has deteriorated, and the loan charge-offs by banks increased in the third quarter. As energy and other commodity prices have consolidated after recovering from their lows, cyclicals have lost some of their earnings momentum. Also, after the surge from higher stimulus spending in infrastructure and other construction activity, demand growth has softened. This will likely restrict prices in the near term, forcing producers to be more cautious in their earnings outlook.

Currency Gains Worry Select Economies The faster pace of recovery in emerging economies has attracted heavy capital inflows, pushing up their currencies and reducing export competitiveness. While countries like China with fixed exchange rates have escaped this problem, others with more open currency markets are bearing the brunt. Brazil was forced to impose taxes on capital inflows recently and others are actively intervening in the market to prevent further appreciation. Currency strength is a major worry for developed countries which are major exporters, including Japan, Germany and Canada. The currencies of all these countries have seen sustained gains against the dollar in recent months and may offset part of the revival in economic growth.

Credit Availability Remains a Concern in the Developed World

After exceeding expectations in the second quarter, third quarter corporate earnings presented a mixed picture. While this is in part due to the high hopes built up after the strong performance earlier, there are now genuine concerns about demand growth in select sectors. Though there are exceptions, most consumer-oriented businesses continue to face subdued demand as consumers are still cautious. Consumer durables are worse off, as financial incentives for new purchases have ended in most countries.

For the developed world, restricted credit availability remains one of the major constraints on economic expansion. While many large banks have strengthened their balance sheets by deleveraging and raising additional capital, rising loan loss provisions will weaken them again. This will restrain their ability to extend credit, and even the stronger banks will be more cautious. Though credit expansion continues to be strong in emerging economies, it may change if the banking industry becomes saddled with higher bad assets.

The banking and financial services sector is seeing large variations in business outlook among the different segments. Investment banks and other

Sources: TWI consensus estimates

Comparing Immersion to its Sub-Industry Peers TWI USETS Universe: Over 3,000 52-Week Price U.S. exchange-traded stocks, both Return & Rel. domestic & international Strength Rank TWI USETS UNIVERSE 29% 51

(Medians)

Market Cap. ($) 1.61B

Price ($)

1.61B 710.75M 107.64M

Estimated PE Ratios & Relative Rankings Cur. Year Next Year 17.1 51 15.0 51

Estimated EPS Growth & Relative Rankings Cur. Year Next Year -2% 51 17% 51

EPS Revisions (3 mos) & Relative Rankings Cur. Year Next Year 2% 51 1% 51

Estimated P/Sales Ratios & Relative Rankings Cur. Year Next Year 1.3 51 1.3 51

TWI Computer Products

29%

51

17.1

51

15.0

51

-2%

51

17%

51

2% 51

1%

51

1.3

51

1.3 51

Peer Group

17%

61

12.5

23

11.1

21

-24%

67

18%

49

3% 43

4%

39

1.6

57

1.4 55

-12%

87

NA NA

NA

NA

74%

15 -12%

93

NA NA

NA

NA

2.6

75

413.87M

11.26

3.85 IMMR Immersion Corp. PANL

Universal Display Corporation

48%

36

NA

NA

NA

NA

-9%

56

28%

37

1%

57 -40%

96

28.4

99

21.3

297.65M

11.12

SIGM

Sigma Designs, Inc.

18%

60

11.0

16

10.3

16

-36%

74

7%

75

-17%

89 -20%

92

1.5

55

1.3

51

566.62M

11.51

EFII

Electronics For Imaging, Inc.

14%

64

NA

NA

42.6

93

-99% 100 199%

7

11%

24

12

1.4

53

1.3

51

22%

2.3 73 99

1.11B

24.94

AVCT

Avocent Corporation

58%

30

16.5

48

13.3

38

-24%

67

24%

41

3%

43

4%

38

2.1

66

1.9

67

854.89M

25.14

SYNA

Synaptics, Incorporated

19%

59

12.5

23

11.2

21

-8%

55

12%

61

0%

60

-3%

72

1.7

60

1.5

58

2.04B

26.12

LXK

Lexmark International, Inc.

8%

69

9.6

10

11.1

20

-24%

67 -13%

94

15%

19

25%

10

0.5

18

0.6

20

6.83B

7.86

XRX

Xerox Corporation

15%

63

13.8

30

10.9

20

-48%

79

38

6%

35

4%

39

0.5

14

0.5

15

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Immersion Corp.

Page 4 of 4

Disclosures

NASDAQ: IMMR

This Report's Objective

Glossary

This Thomas White investment report is designed to be a valuable resource to investors who buy and sell stocks based on their own research. It is provided by an institutional asset management organization whose security analysts use it as one of a number of inputs when making their investment decisions. They also seek to develop confidence in the company's outlook by evaluating the company's management and the quality of its products. Please recognize that this report does not offer opinions on these important research areas.

Thomas White Stock Coverage and Market Indices The Thomas White USETS© (US exchange-traded stocks) universe and indexes include roughly 3000 of the largest domestic and international stocks that trade on the major United States exchanges. A stock’s industry and country placement is set according to the Thomas White General Industry Classifications (GIC).

The Thomas White Quantitative Research Approach

Thomas White Asset Class and Investment Style Large-caps stocks include the largest 1000 US stocks by capitalization; the next 2000 are classified small-caps. Non-US stock asset classes have the same cap size breakpoint. Value, blend and growth styles are set in mid-year using their valuation ratios and growth rates.

The goal of our quantitative research reports is to provide ratings that align stocks by their future 1 to 2-year total return performance. We use a valuation-oriented strategy that takes advantage of the fact that investors are often shortsighted, overpricing a company when it is doing well, and underpricing the company during difficult times. As such, a stock is ranked Most Attractive when our quantitative model suggests it is at the lowest point of its undervaluation and Most Unattractive when the stock is at the peak of its overvaluation.

Thomas White Risk Profile Rank This rank reflects the stability of the company’s business and the price volatility of its stock. Risk ranks do not project price direction.

How do we determine the stock's value? Our analysts study a stock's 20-year performance relative to other companies in its industry. Stocks tend to be priced by a common valuation definition within their industry. Studies identify these industry-specific common denominators, which are combinations of financial ratios. This approach is classical fundamental valuation analysis, but with our large financial databases and use of computer processing, we are able to perform this research far more thoroughly than earlier value managers. Our report is considered quantitative because our ranks do not include the additional qualitative analysis investors need to make a well-researched decision.

Thomas White Financial Quality This measure of a company’s creditworthiness reflects Thomas White’s assessment of its normal earnings power, debt ratios, working capital, business risk and potential legal liabilities. Thomas White Consensus Sales & Earnings Estimates These are compiled by Thomas White weekly using fresh estimates from a select number of sell side security analysts.

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Chart pg 2: Relative Strength Rank A stock’s RS Rank is its 52-week return ranked from 1 (best) to 99 within the Thomas White USETS universe. This chart shows that a stock’s price may be influenced by the popularity of its industry, asset class or investment style. An industry RS Rank is the average RS Rank of the stocks in that industry.

The firm was founded in 1992 by five professionals from Morgan Stanley Asset Management. Its President, Thomas S. White, Jr., was a Managing Director in charge of the firm's value style equity investing. The valuation methods used in this research were initially produced in 1976 exclusively for Sir John Templeton, who heavily influenced their design and refinement over many years. Thomas White International is primarily an institutional asset manager with domestic and international portfolios and mutual funds. Research analysts in its Chicago and Bangalore, India offices currently value stocks in 45 developed and emerging market countries. The firm's research reports provide stock ratings based on its quantitative models. These ratings should not be confused with the analyst-driven conclusions used in its asset management division.

Large vs. Small and Value vs. Growth performance charts are presented to enable investors to observe their possible influence on a stock’s performance.

This report offers investors quantitatively derived equity ratings and related return estimates from Thomas White International, Ltd. It uses a fiveclass Buy-Hold-Sell rating system: the most favorable and favorable ratings are buys; neutral ratings are holds and unfavorable and most unfavorable rates are sells.

Stock Ratings The terms below are used to rate a stock’s 12month performance: Buy: Expected to outperform the S&P 500 producing above average returns. Hold: Expected to perform in line with the S&P 500 with average returns. Sell: Expected to underperform the S&P 500 producing below-average returns. As of June 30, 2009, the quantitative stock selection model at Thomas White International, Ltd. had Buy ratings on 31.2% of its universe, Hold ratings on 41.3% and Sell ratings on 27.5%. All ratings and explanations of the models and their component valuation ratios that determine these ratings are from Thomas White International, Ltd. These rating are strictly quantitative, using industry-specific valuation models developed by the firm over many years. They have not been reviewed or altered in any way by the traditional fundamental analysts at Thomas White. As such, these computer-driven ratings should not be compared to the investment conclusions that Thomas White’s security analysts use in their asset management business. Quantitative conclusions should be used as an early step to identify stocks that merit further more qualitative analysis. In an attempt to reduce potential conflicts with clients, Thomas White prohibits their employees from buying equity securities and from being officers or directors of listed companies. The investment companies and investment advisory accounts Thomas White advises own less than 1% of this company. Thomas White does not offer brokerage or investment banking services. It adheres to professional standards and abides by a formal code of ethics that put the interests of clients ahead of its own. Its compliance officer monitors adherence to these standards.

Disclaimer Past performance is not a guarantee of future results. The material is based upon information Thomas White considers reliable, but does not warrant its completeness or accuracy, and it should not be relied upon as such. Assumptions, opinions, and estimates constitute a quantitative model’s output as of this report’s date, and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of securities mentioned herein. The material does not take into account your particular financial situations, objectives, or needs, and is not intended as a personal recommendation. Before acting on recommendations in this material, you should consider whether it is appropriate for your particular situation, and, if necessary, seek professional advice. ©2009 Thomas White International, Ltd.

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