Storage VAR Datalink Reports A Down 2009, But Builds For 2010

A strong fourth quarter revenue surge was not enough to turn the financial tide for storage VAR Datalink, which this week reported a drop in 2009 revenue and earnings compared to 2008.

Acquisitions, the economic downturn, and a severance agreement with its former president and CEO all took their toll on the company's financial performance, but it ended the year with a record backlog, signaling possible growth in 2010.

Datalink, a Chanhassen, Minn.-based national storage solution provider, on Wednesday reported revenue of $51.8 million for its fourth quarter 2009, which ended December 31. This was up 7.5 percent from the $48.2 million it reported for the same period last year.

The company also reported a loss of $158,000, or 1 cent per share, down from a profit of $843,000 in the same period of 2008.

The revenue figure included $4.4 million it received after it closed its acquisition of Incentra's reseller business, which gave it a geographical expansion and an established relationship with Sun Microsystems, which earlier this year was acquired by Oracle.

That acquisition came just days after Datalink acquired the Cisco-centric networking business of Bloomington, Minn.-based Cross Telecom for $2 million in a bid to prepare for the industry move towards data center virtualization and the convergence of storage and IP networks.

For all of 2009, Datalink reported revenue of $178.1 million, down 8.9 percent from the revenue it reported for 2009. The company reported a loss of $555,000, or $0.04 per share, compared to a profit of $3.4 million, or 27 cents per share, for 2008.

Included in the 2009 results was a $624,000, or 3 cents per share, charge for cash and non-cash items related to the severance agreement with Datalink's former president and CEO in the third quarter. Excluding that charge, 2009 earnings would have totaled $69,000, Datalink said.

For 2009, Datalink's services revenue rose a slight $1.2 million over 2008 to reach $83.3 million. However, product sales plunged 16.5 percent to $94.5 million for the year.

Datalink ended the fourth quarter of 2009 with a record backlog of $46 million, including a backlog of about $9 million from the Incentra acquisition. For that reason, the company expects revenue to be between $62 million and $66 million for the first quarter of 2010.

The company also expects a per-share loss of between 8 cents and 4 cents during the quarter thanks in part to transition expenses related to the Incentra acquisition.

This compares to revenue of $39.9 million with a loss of 5 cents per share in the first quarter of 2009.

Paul Lidsky, Datalink's president and CEO, said in a prepared statement the company plans to expand both its current and new customer bases by leveraging its design and implementation experience in next generation data centers.

"At the end of the first quarter we will have completed the organization and back office integration of the Incentra business and will continue to work to extract all operational synergies from the acquisition as we move forward. We look forward to continued growth and progress throughout the new year," Lidsky said.

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