Hardware Sales Give Storage VAR Datalink 2Q Boost

The Minneapolis-based company reported revenue for its second fiscal quarter, which ended June 30, of $39.8 million, up 39 percent compared to the $28.7 million reported for the same period last year. Earnings for the quarter were $2.0 million, or 18 cents per share, compared to last year's earnings of $446,000, or 4 cents per share.

It was Datalink's highest second quarter revenue ever, and the best operating margins the company had since 2001, said CFO Greg Barnum. "We're not quite up to our 1999 and 2000 levels, but we're getting close," he said.

Datalink is enjoying the benefits of a strong economy with customers continue to purchase and refresh its storage, Barnum said. The company has also implemented new IT systems to provide its expanded sales and service team improved sales tools. He said the company has also been making a conscientious effort to train its people on how to sell services, not just hardware.

However, it was hardware which pushed the solution provider over its earlier guidance of $32 million to $36 million in revenue, Barnum said. "We exceed our second quarter guidance because of two big hardware deals at the end of the quarter we were not expecting," he said.

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Those big hardware orders are also the reason Datalink is lowering its third quarter guidance to between $33 million and $37 million and earnings of 5 cents to 10 cents per share, compared to last year's $31 million in sales and 3 cents per share, Barnum said. "Guidance is down because those last few big orders won't necessarily happen again," he said.

Because of a few large hardware-only orders, services accounted for only 26.5 percent of Datalink's business last quarter, compared to the company's typical 30 percent, Barnum said. "In the last couple quarters, we've see a few product-only orders," he said. "No design or other services. So it skewed [the products/services ratio]. But as time goes on, it will get back to 70 percent product and 30 percent services, our optimal mix."