Datalink Q2: Big Growth On Services, New Data Center Techs

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Datalink caught investors by surprise Thursday when it reported better-than-expected second-quarter results.  

The Eden Prairie, Minn.-based midrange solution provider cited increasing sales of high-margin services and a push by customers to adopt new IT solutions including flash storage, converged infrastructure and the cloud as a big part of its growth and profitability during the quarter.

Datalink reported second-quarter revenue of $159.4 million, up about 8 percent in the year-ago period.

[Related: EMC's Tucci Addresses Question Of Potential VMware Spinoff On Q2 Financial Call]

Datalink reported GAAP earnings of $3.6 million, or 16 cents per share, compared to earnings of $2.9 million or $0.16 per share in second-quarter 2013. Non-GAAP earnings were $4.9 million, or $0.22 per diluted share, compared to last year's earnings of $4.7 million, or $0.26 per diluted share.

The results exceeded Wall Street expectations of $149.6 million in revenue and non-GAAP earnings of $0.13 cents per share.

The company's shares closed up about 20 percent on Friday to $11.97. 

Paul Lidsky, Datalink’s president and CEO, said during the company's quarterly earnings call with analysts Thursday that the strong results came from a variety of reasons.

"Some of this growth stems from closing sales that we expected in the first quarter, but that did not materialize until the second quarter because customers were spending extra time evaluating newer technologies like private and hybrid cloud and flash and hybrid converged storage."

Datalink CFO Greg Barnum said services were a big contributor to the solution provider's success.

Professional services accounted for about 8 percent of Datalink's total revenue in the first six months of 2014 compared to 7 percent during the same period as last year, Barnum said.

"This growth is a key focus area as we need these higher-margin professional service revenues to increase as a percentage of our total revenues in order to offset any product margin pressures," he said.

NEXT: Margins Up, Server And Networking Up; Storage Down, And That's Good

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