Storage VAR Datalink Still Growing Despite The Economy

Minneapolis-based Datalink this week reported strong revenue and earnings growth for its third fiscal quarter, which ended September 30, despite what Charlie Westling, Datalink's President and CEO, called a "very challenging economic environment."

For the quarter, Datalink reported revenue of $50.0 million, up 9 percent over the $45.8 million it reported during the same quarter last year. Revenue for the first nine months of the year was $147.4 million, up 16 percent over the $127.1 million reported last year.

For the quarter, the company reported earnings of $1.1 million, or 8 cents per share, compared to earnings of $844, or 7 cents per share, last year. The company also said its nine-month earnings hit $2.6 million, or 20 cents per share, compared to a loss of $221,000, or 2 cents per share, last year.

The earnings and revenue figures for this year included the results of Midrange Computer Solutions (MCSI), which Datalink acquired for $14 million on January 31, 2007.

In a statement, Westling said the growth in revenue and earnings "were delivered in a very challenging economic environment, and reflect our focus on delivering storage solutions that offer compelling business value to our customers. We also continue to do a good job of wrapping professional services and customer support around the products and technologies that we are bringing to our customers."

During the quarter, Datalink said it improved gross margin to 27.5 percent, up from 25.9 percent last year. That came in part from an increase in services revenue of 16.6 percent to $21.1 million

In his statement, Westling said that tightening credit did result in some delayed and scaled-back purchases, but that the company finished with a solid backlog of orders.

That backlog was $31 million, down only slightly from the $32 million backlog it had at the end of the second quarter.

Westling said in his statement that he expects a good growth in revenue and profit for the fourth quarter, but that it may not be at the historical fourth-quarter growth rates.

For the fourth quarter, the company expects revenue to be between $49 million and $53 million, compared last year's revenue of $50.7 million. The company expects earnings of between 8 cents and 12 cents per share in the fourth quarter, compared to 11 cents per share last year.