Part of the problem with IMMR, despite the volume, is the concentration of revenues with Samsung, now more than 50%. At present valuations, the stock is trading about 10x sales, which isn’t that much, all things considered. The question is: how do we get a richer valuation for the stock?
The only way the happens is diversification of the customer base, which is happening, slowly but surely. The new playstation 4 will be a brand new revenue source for them, as well as 3rd party control makers for the new Xbox. But we all know what turns IMMR from a $10-20 stock to a $40-50 stock: Apple.
In my opinion, after speaking with management, Apple is extremely hesitant of adopting Immersion’s haptic technology, partly due to pride of not having it first and arrogance. It’s widely believed that if Apple offers haptics, they will try to do so without paying Immersion their proper royalties. Eventually, this will end up in court and IMMR will win, but at what expense?
The more immediate issue that I’ve been exploring is the shareholder base. Amazingly, more than 70% of the shares are owned by institutions, patiently waiting for this to materialize. If you think about it, that’s a shockingly high number, considering they’re small cap and a speculative IP play.
Then we get to the curious case of Dialectic Capital, a NYC based hedge fund with about a billion under management. Its manager, John Fichtorn, is on the Immersion board, due to once having a 7% stake in the company. Originally, he got on the board by asking for change at the company, helping it divest from non-core businesses and focus the company on shareholder value. His investment paid off, in spades, with the stock up sharply since his original investment.
However, as of late, he’s been a seller of the stock. In private emails, he describes his position as being “too large for his fund” and he’s been paring it down to an appropriate size. There’s nothing wrong with selling. Hell, I do it all the time. However, I’m not on the board of directors, privy to material information that might be a predictive element of where the stock is heading.
I have a big problem with this.
If Mr. Fichtorn’s advocacy is over at Immersion, he should resign from the board and make room for someone who will not raise eyebrows whenever an S-4 is filed. He’s not just an ordinary shareholder, but a hedge fund manager with a big stake, on the board, selling regularly.
I don’t know much about Dialectic’s performance and I haven’t done much research into the matter. However, I do know he’s been short HLF, long GLD and has a big stake ln TLAB, a perennial dog. It seems to me, on the surface, that his 2013 numbers might be coming in a little less than stellar, which makes his big win in IMMR an all too attractive “source of funds” to throw good money after bad.
My back of the envelope valuation for IMMR is $23, based upon a 10x p/s ration, off projected 2014 numbers.
http://www.youtube.com/watch?v=jtWyarBwF-I
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I’m staying long IMMR and AMBA, thanks for the skinny on Immersion. As for Apple, I’ve bought some too, through its recent drop, just a bit; I think some people have not appropriately allocated their funds when buying Apple and their comments on Stocktwits sound quite desperate. The same steep drop happened when Icahn announced he had taken a 5% stake in RIG, it ran to $58 and is down $12 since then. I am long RIG, also small.
Nice post and observations on the inner workings of IMMR. Gives one pause as to exactly what is going on there…
Unrelated, Nigel Farage is a fucking BOSS. We have Noone in the US that can forcefully and coherently articulate their positions. We get people like Kerry and Obama bloviating nonsense, or those like Dubya that can barely piece together a coherent sentence.
Considering Fichtorn only sold 7 (+/-) % of his position which reasonably fits the thesis of scaling back his fund’s third largest play in a small cap speculative stock, what would it take to fully raise a red flag? A larger percentage or simply another sale?
The consistency of the sales spells divesting. If so, he should be honest with himself and for the sake of the rest of IMMRs shareholders and resign from the board.
In theory, could Apple just do a software update integrating the proper IMMR technology, to incorporate haptics into their phones? Or would it additionally require a hardware change? Seems to me that not only would they not want to pay, but they would be seen as copying Samsung at this point. They may also view it as a “cheesy” feature.
Haptics has proven to enhance user experience over and over again.
They probably don’t want to do it because Sammy for first.
It requires additional hardware.
Guess we will have to wait until Iphone 6 to see if they change hardware…
Side note: The accum/distribution line on the IMMR chart has been curious lately. Consistently moving down even with price going up…
That stat is correct. We have a net seller.
No cant just do a software update. Immersions advanced haptic technology is implemented at the manufacturing level. I was working at a mobile tech company and they came around to do a presentation. Their haptic experience is like nothing you have ever experienced. Its high fidelity and you experience and incredible range of touch sensations. They do some clever stuff with the weighted dynamo alternating directions in miliseconds which help create the touch illusions. If anything i think IMMR is a future buy out candidate.
Fly- check this out. Look at the publication dates for the patents, they’re very recent. Compare the three and whose R&D is pumping out new haptic tech. Apple seems very active, articulate, and diverse.
Apple: https://www.google.com/?tbm=pts#q=inassignee%3A%22Apple%2C+Inc.%22+haptics&safe=off&tbm=pts
Sony: https://www.google.com/?tbm=pts&hl=en#hl=en&q=inassignee:%22sony%22+haptics&safe=off&tbm=pts&tbs=sbd:1
Immersion: https://www.google.com/search?q=inassignee%3A%22Immersion%22&safe=off&biw=1422&bih=818&sa=X&ei=ELQ3UvndFNin4AOgvYCYBA&ved=0CBgQpwUoAg&source=lnt&tbs=cdr%3A1%2Cptsdt%3Ai%2Ccd_min%3A9%2F16%2F2007%2Ccd_max%3A9%2F9%2F2013&tbm=pts
Yes, that jibes with what I’ve been told. They will try to claim a new innovative approach to haptics. But they will lose in court.
Apple MAY lose in court — there can be no certainty re: 12 idiots on a jury.
Furthermore, as you know Apple lost in court to VHC, and you can see how well that worked out for VHC shareholders thus far (not very).
Even after they lost in court, rather than settle with VHC Apple screwed their enterprise customers by turning off auto-VPN (a decision they were forced to rescind), and screwed Facetime users by moving to relay servers (at significant cost).
Apple just does not want to pay for IP period, and they will use every possible trick to avoid doing so. I look forward to judge Davis wacking them upside the head with a big court-ordered royalty some day soon.
America is the root of all terror. America has invaded sixty countries since world war 2.
In 1953 America overthrow Iran’s democratic government Mohammad Mosaddegh and installed a brutal dictator Shah. America helped Shah of Iran to establish secret police and killed thousands of Iranian people.
During Iran-Iraq war evil America supported Suddam Hossain and killed millions of Iranian people. In 1989, America, is the only country ever, shot down Iran’s civilian air plane, killing 290 people.
In 2003,America invaded Iraq and killed 1,000,000+ innocent Iraqi people and 4,000,000+ Iraqi people were displaced.
Now America is a failed state with huge debt. Its debt will be 22 trillion by 2015.
“Part of the problem with IMMR, despite the volume, is the concentration of revenues with Samsung, now more than 50%. At present valuations, the stock is trading about 10x sales, which isn’t that much, all things considered”
10x sales is expensive is you look more skeptically at the fact that even if the technology becomes more widespread, both the timing and amount of earnings, in addition to the terms of the royalties that constitute >90% entire revenue (they spend near nothing on R&D) are not assured to be lucrative simply because the technology seems useful (which it certainly is).
It’s less a bet on the technology and more a bet that they have a good legal team to secure lucrative contracts before, as you state, a bitter AAPL, INTC or QCOM or whomever “five finger discounts” or develops a competing technology.
Whatever the range, it’s probably not a steal at 10x sales, and even if so, I dislike the “press release” nature of the valuation inasmuch as it’s dependent on the next big score (100% not coming from MSFT / Xbox…) to warrant a higher price (15, 20, etc).
We need a fucking catalyst. Some out of left field money falling from the sky then tripling when it hits dirt then quadruples when it sponsors ebt. Booms demand it. Where the fuck is the helicopter? Me Me Me generation mofo.
Apple willfully infringing and then litigating a client to death? Sounding like VHC…
You know who hasnt sold a share, Rima Senvest. That dude has annual returns of over 100% …gotta love the under $1billion funds. They can move like sharks.
so how does the fly pull an Icahn and get on this board?