Datalink: FlexPod, Converged Infrastructure, Services Create Great 2013 Financials

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"This trend of our professional services growing faster than product is important as services carry considerably higher gross margins than product, and will help offset any decline in product margins due to changes in the competitive environment and product mix changes," Barnum said.

In terms of Datalink's overall revenue mix for the fourth quarter, 36 percent came from storage, 18 percent from networking and servers, 9 percent from software, 1 percent from tape, and 36 percent from services, he said.

Storage accounted for 31 percent of revenue in the third quarter of 2013, while servers and networking accounted for 20 percent, Barnum said. The higher mix of storage in the fourth quarter helped increase Datalink's margins from 21.5 percent in the third quarter to 23.5 percent in the fourth quarter, he said.

Paul Lidskey, Datalink president and CEO, said there were several factors that contributed to the company's growth in 2013. These included an emphasis on converged infrastructure, which let the company sell into increasingly complex data center environments; growing partnerships with its primary vendor partners Cisco and NetApp; a broader portfolio of products and services; and an expansion of higher-margin professional services, Lidskey said.

Datalink in 2013 generated $534 million in revenue from 1,786 repeat customers, compared with $447 million from 1,666 repeat customers in 2012, due in part from the 2012 acquisition of StraTech, Lidskey said.

The company also generated $60 million in revenue from 440 new customers in 2013 compared with $44.6 million from 452 new customers in 2012, Lidskey said.

"So while we had 3 percent fewer new customers, these same customers spent 35 percent more," he said. "Keep in mind that this represents only one year of spend, and many of our projects have multiyear road maps where we expect to bring in additional revenue in the future."

Converged infrastructure, particularly sales based on the joint NetApp-Cisco FlexPod reference architecture, is an increasingly important part of Datalink's business.

Lidskey said Datalink in 2013 closed 98 converged infrastructure deals totaling about $91 million, or about one of every six dollars of revenue for the company. That was up from 83 converged infrastructure deals totaling $78 million in 2012.

Two-thirds of those deals were based on the FlexPod infrastructure with components from NetApp, Cisco and VMware, with sales up 85 percent over last year, Lidskey said.

NEXT: Investing Heavily In Building The Services Business


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