Datalink Corp. (DTLK) – Buzz Stock of the Day

Posted on Tuesday, January 18th, 2011

Shares of data center solutions provider, Datalink Corp. (Nasdaq: DTLK) opened 38 percent higher from Friday’s closing price in morning trading on Tuesday after the company announced that it expects to “significantly exceed” its previous Q4 revenue and earnings guidance.

Datalink Corp. shares soared as much as high as $6.60 — a new three-year high for the Chanhassen, Minnesota-based company.

Datalink new expects Q4 revenues to be approximately $90 million, up from previous revenue guidance of between $75 million and $80 million. If the company meets its guidance, it would mark a 70 percent increase over Q4 2009 revenue of $51.8 million, and a sequential increase of 45 percent, compared to revenue of $60.2 million in Q3 2010.  Excluding items, Datalink now expects earnings 21-24 cents a share, up from previous earnings guidance of 12-16 cents a share.

Datalink CEO, Paul Lidsky attributed signing of new clients in the quarter to increased revenue growth, but said these transactions carry low gross margins. He said the company expects gross margins to decline to roughly 22 percent in Q4, compared to 24.1 percent in the third quarter. Datalink  said it ended the fourth quarter with a record backlog of more than $47 million, up slightly from a year-earlier record of $46 million.

“We continued to see strong demand for our data center solutions during the quarter as the result of a steadily increasing trend in technology spending, coupled with the success from our previous investments to expand Datalink’s market share around data center solutions,” Lidsky said in a statement. “Another key driver of the revenue growth was our success in closing several multi-million dollar sales at Fortune 100 companies during the quarter.”

Shares of Datalink Corp. are up about 73 percent over the past three months.


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