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Datalink Updates Guidance

CHANHASSEN, Minn. -- Datalink Corporation (Nasdaq:DTLK), a leading independent information
storage architect, today revised its financial guidance for the second
quarter ended June 30, 2007.

The company anticipates revenues for the second quarter of 2007 in the range
of $40 million to $41 million, compared with $39.8 million in the
year-earlier period and $40.9 million for the 2007 first quarter. Year-ago
revenue did not include the acquisition of Midrange Computer Solutions
(MCSI), which closed in February 2007, and the 2007 first-quarter
performance included two months of MCSI revenue. On the basis of generally
accepted accounting principles (GAAP), Datalink anticipates a loss in the
range of $.03 to $.05 per diluted share. The year-ago GAAP earnings totaled
$.18 per diluted share, and the company had a loss per diluted share of $.06
in the 2007 first quarter. The company's non-GAAP loss is expected to range
from $.01 to $.03 per diluted share for the 2007 second quarter. This
compares with non-GAAP net income of $.11 per diluted share a year-earlier
and a non-GAAP loss of $.01 per diluted share in the first quarter of 2007.
In April, Datalink provided revenue guidance of between $49 million and $54
million, with GAAP net earnings ranging from break-even to $.05 per diluted
share and non-GAAP earnings in the range of $.02 to $.07 per diluted share.
"We have seen a slow down in IT and storage spending with some of our larger
customers, as they have become more cautious about the economy and their
individual growth prospects. This cautiousness has created longer sales
cycles, with a number of large projects delayed from the second quarter. As
a result, we expect Datalink's revenue and earnings for the second quarter
to be below our original guidance," commented Charlie Westling, Datalink's
president and CEO.

"While this quarter's shortfall was disappointing to us, we still believe
that the long-term trends for storage growth remain compelling, as
corporations generate more data in multiple formats, requiring updated
storage products and services. Based on our backlog of over $30 million for
the third quarter and our current sales opportunity pipeline, we expect to
see an uplift in business activity in the second half of the year. We have
taken a number of steps to position the company to return to profitable
growth during the remainder of 2007. These actions include:

  • combining the company's field engineering and customer support
    organizations in order to better utilize Datalink's technical resources;
  • merging the Western and South Central regions to take advantage of
    economies of scale;
  • refocusing our efforts on acquiring new enterprise accounts; and
  • holding the workforce at current levels while focusing on
    opportunities to increase employee productivity."

Datalink Corp.