Microsoft gets touchy feely with $26m Xbox pay-off

Immersion Tanked

Immersion has signed a $26m licensing deal with Microsoft, settling its lawsuit with the software giant and giving Microsoft a 10 percent stake in the firm.

In February 2002, US-based Immersion filed a lawsuit against Microsoft and Sony for patent-infringement, for use of its haptic, or touch, technology. While litigation against Sony is ongoing, Microsoft's decision to spend $26 million to license Immersion's technology effectively ends the legal fight between the two.

Immersion's haptic technology is used in a variety of devices, including mobile phones, PDAs, medical equipment and automotive gear. In video games, for example, haptic technology will make a controller vibrate in a specific way when a virtual machine gun is fired or when safe is picked. Immersion alleged that Microsoft and Sony were using its tactile technology, without a licence, in their Playstation and Xbox games consoles.

But under Monday's agreement Microsoft will now be able to use Immersion's technologies in its operating systems, handheld devices, computing platforms and other current products and services, and in those it develops in the future.

"Microsoft recognises the importance of haptic technology to consumers, the value of Immersion's patent portfolio in this space, as well as Immersion's role as a leading supplier of haptics," Microsoft's director of business development Barry Spector said in a statement, acknowledging the increasing complexity of human interaction with digital technologies.

In addition to the $26 million payment to Immersion, Microsoft will lend the company $9 million in convertible debenture, or unsecured debt that can be converted into stock over a specified period of time, in this case 48 months.

Immersion also expressed its satisfaction with the deal, highlighting Microsoft's global reach as a major carrier for haptic technologies.

"Microsoft is the world's leader in software services and Internet technologies. They are an ideal partner to help demonstrate the value and benefits of haptic technologies to consumer markets such as personal computers, games, and handheld devices," said Victor Viegas, president and CEO of Immersion.

The payment might also help Immersion return to the black, after it posted a second quarter net loss of $4.4 million, or $0.22 per share, on revenues of $4.1 million. This is up more than 100 percent on last year's second quarterly net loss of $2.1 million or $0.10 per share.

On the upside, Immersion stock rose to $4.75 in after hours trading, from a closing price of $1.85.


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