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Datalink

Webcast

Datalink Corporation (ticker: DTLK, exchange: Nasdaq) News Release – Feb. 6, 2008

Datalink Reports 2007 Fourth-Quarter and Full Year Operating Results
Record Fourth Quarter 2007 Revenues of $50.7 million; Full Year 2007 Revenues up 22% from 2006

MINNEAPOLIS – Feb. 06, 2008 - Datalink Corporation (Nasdaq: DTLK), a leading independent information storage architect, reported that revenues for the quarter ended December 31, 2007, were $50.7 million compared to $38.7 million for the prior-year period and $45.8 million in the third quarter of 2007, an increase of 31 percent and 11 percent, respectively. Revenues for the year ended December 31, 2007, increased 22 percent to $177.8 million compared to $146.0 million for the prior-year period. Datalink's results for the 2007 fourth quarter and full year include three and 11 months respectively, of Midrange Computer Solutions, Inc. (MCSI) results of operations following the acquisition which closed on January 31, 2007.

GAAP Results
On a GAAP basis, the company reported net earnings of $1.4 million, or $0.11 per diluted share for the fourth quarter ended December 31, 2007. This compares to net earnings of $4.4 million, or $0.38 per diluted share, in the fourth quarter of 2006. For the year ended December 31, 2007, the company reported net earnings of $1.2 million, or $0.10 per diluted share, compared to net earnings of $8.5 million, or $0.76 per diluted share for the year ended December 31, 2006.

Non-GAAP Results
Non-GAAP net earnings for the fourth quarter of 2007 were $1.6 million, or $0.13 per diluted share, compared to non-GAAP net earnings of $1.4 million or $0.12 per diluted share, in the fourth quarter of 2006. For the year ended December 31, 2007, the company reported non-GAAP net earnings of $2.6 million, or $0.21 per diluted share, compared to net earnings of $4.0 million, or $0.36 per diluted share for 2006.
Charlie Westling, Datalink's President and CEO, commented, "We are pleased with our performance in the fourth quarter and that the company was able to report results that were at the high end of our previous guidance range. This performance is a result of increased customer spending in the fourth quarter and delivering on several strategic initiatives we set for ourselves at the beginning of the year. The initiatives were:
-- Successful integration of the MCSI acquisition. In addition to achieving cost synergy savings of over $1 million, Datalink was also successful in training the MCSI sales force to sell higher margin solutions. This was evidenced by the increase in overall gross margins from 24.1 percent in the first quarter of 2007 to 26.5 percent in the fourth quarter of 2007.
-- Improved productivity across the sales organization with more balanced performance as evidenced by a 25 percent increase in the annualized gross profit contributed per account executive in the fourth quarter of 2007 versus the third quarter of 2007, following an 18 percent rise in the third quarter over the second quarter of 2007. In addition, the company saw continued leverage in its corporate functions. For the full year 2007, general and administrative expenses grew 12 percent over 2006, while revenues and gross profit grew over 22 percent in the same period.
-- Continued growth in customer support and professional services business as evidenced by service revenues increasing 53 percent in 2007 to a record $66.6 million, with the customer support portion of service revenues growing 62 percent on a year-over-year basis.
-- Continued to maintain a strong balance sheet. During the year the company generated over $5 million of cash from operations ending 2007 with over $25 million in cash and investments and no debt."
Westling continued, "As we head into 2008 we believe that we can build off our strong performance in the second half of 2007 and continue our profitable growth this year by executing on our key initiatives. Datalink's priorities are:
-- Continuing to increase employee productivity by leveraging investments in field and customer support areas;
-- Further penetrating the enterprise customer base;
-- Targeting high growth market segments and deploying new technologies;
-- Delivering greater value to customers through more solutions and services; and
-- Pursuing acquisitions that will enable the company to achieve critical mass in key locations faster or provide additional services to its customers."

Outlook
The company ended the quarter with a backlog of $31 million as a result of traditionally strong year-end sales activities and the continued growth of the customer support business. "We have traditionally seen an increase in customer spending at year-end as customers spend their remaining budget dollars, followed by slower spending in the first quarter. We expect this trend to continue in 2008. Combined with higher first quarter expenses we believe we will see a sequential decrease in revenues and earnings in the first quarter," continued Westling. The company expects revenue between $44 million and $48 million, with GAAP net earnings to be between break-even and $0.04 per diluted share in the first quarter of 2008. This compares with revenues of $40.9 million in the first quarter of 2007 and a GAAP loss of $0.06 per diluted share. The 2007 first quarter included two months of results from the acquisition of MCSI. On a non-GAAP basis, the company expects first quarter earnings per share to be in the range of $0.02 to $0.06 per diluted share. Non-GAAP earnings per share exclude the effect of purchase accounting adjustments to deferred revenue, stock-based compensation expense, amortization of intangible assets, and the related effects on income taxes. The company estimates this total effect will be $.02 per diluted share for the first quarter.

Conference Call and Webcast Today
Datalink will hold a conference call today at 4:30 p.m. Central Time during which time Datalink's president and chief executive officer, Charlie Westling, and vice president of finance and chief financial officer, Greg Barnum, will discuss company results and provide a business overview. Participants can access the conference call by dialing (866) 863-7084 (no later than 4:25 p.m. Central Time). Participants will be asked to identify the Datalink conference and provide the designated identification number (31544853). A live Webcast of the conference call can be heard via Datalink's Website at www.datalink.com.

Datalink Corporation is an information storage architect. The company analyses, designs, implements and supports information storage infrastructures that store, protect and provide continuous access to information. Datalink's specialized capabilities and solutions span storage area networks, network-attached storage, direct-attached storage and IP-based storage, using industry-leading hardware, software and technical services.

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. This press release contains forward-looking statements, including our internal projections of anticipated 2008 results, which reflect our views regarding future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including those identified below, which could cause actual results to differ materially from historical results or those anticipated. The words "aim, "believe," "expect," "anticipate," "intend," "estimate" and other expressions which indicate future events and trends identify forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending upon a variety of factors, including, but not limited to: the level of continuing demand for storage, including the effects of economic conditions; competition and pricing pressures and timing of our installations that may adversely affect our revenues and profits; fixed employment costs that may impact profitability if we suffer revenue shortfalls; revenue recognition policies that may unpredictably defer reporting of our revenues; our ability to hire and retain key technical and sales personnel; our dependence on key suppliers; our ability to adapt to rapid technological change; risks associated with integrating possible future acquisitions; fluctuations in our quarterly operating results; future changes in applicable accounting rules; and volatility in our stock price. Further, our revenues for any particular quarter are not necessarily reflected by our backlog of contracted orders, which also may fluctuate unpredictably.

Non-GAAP Details
Non-GAAP financial measures exclude the impact from purchase accounting adjustments to deferred revenue, stock-based compensation expense, amortization of intangible assets, integration costs related to acquisitions, the reversal of the income tax valuation allowance and the related effects on income taxes. Annualized gross profit is based upon the quarterly gross profit multiplied by four. The 2006 results also reflect the impact of each quarter being fully taxed at an effective rate of 40%. These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with, GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Datalink believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Datalink's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Datalink's results of operations in conjunction with the corresponding GAAP measures.

These non-GAAP financial measures facilitate management's internal comparisons to the Datalink's historical operating results and comparisons to competitors' operating results. We include these non-GAAP financial measures in our earnings announcement because we believe they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making, such as employee compensation planning. Datalink believes that the presentation of these non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to investors and management regarding financial and business trends relating to its financial condition and results of operations.

Financial Statements

DATALINK CORPORATION
                       STATEMENTS OF OPERATIONS
                (In thousands, except per share data)
                             (Unaudited)

                                Three Months Ended Twelve Months Ended
                                   December 31,       December 31,
                                  2007     2006      2007      2006
                                -------- --------- -------- ----------

Net sales:
    Products                    $ 31,584 $ 26,013  $111,201  $102,400
    Services                      19,091   12,680    66,571    43,583
                                ------------------ -------------------
Total net sales                   50,675   38,693   177,772   145,983
                                ------------------ -------------------

Cost of sales:
    Cost of product sales         23,609   19,581    84,369    77,365
    Cost of service sales         13,652    8,934    48,111    30,521
                                ------------------ -------------------
Total cost of sales               37,261   28,515   132,480   107,886
                                ------------------ -------------------
Gross profit                      13,414   10,178    45,292    38,097
                                ------------------ -------------------
Operating expenses:
    Sales and marketing            5,933    3,988    22,067    15,985
    General and administrative     2,770    2,694    11,720    10,434
    Engineering                    2,291    1,581     9,181     6,098
    Integration costs                  -        -       442         -
    Amortization of intangibles      177        -       727         -
                                ------------------ -------------------
                                  11,171    8,263    44,137    32,517
                                ------------------ -------------------
Earnings from operations           2,243    1,915     1,155     5,580
Interest income                      208      257       908       714
                                ------------------ -------------------
Earnings before income taxes       2,451    2,172     2,063     6,294
Income tax expense (benefit)       1,031   (2,203)      864    (2,203)
                                ------------------ -------------------
    Net earnings                $  1,420 $  4,375  $  1,199  $  8,497
                                ================== ===================

Net earnings per common share:
    Basic                       $   0.12 $   0.40  $   0.10  $   0.77
    Diluted                     $   0.11 $   0.38  $   0.10  $   0.76
Weighted average common shares
 outstanding:
    Basic                         12,306   11,001    12,156    11,006
    Diluted                       12,403   11,612    12,392    11,127

                         DATALINK CORPORATION
                            BALANCE SHEETS
                            (In thousands)
                                             December 31, December 31,
                                                 2007         2006
                                             ------------ ------------
                                             (Unaudited)
                                Assets
 Current assets
   Cash and cash equivalents                 $    22,687  $    22,900
   Short term investments                          2,477            -
   Accounts receivable, net                       26,156       22,195
   Inventories                                     6,034        1,593
   Deferred customer support contract costs       39,707       25,876
   Inventories shipped but not installed           9,048        3,502
   Current deferred income taxes                   1,049        1,442
   Other current assets                              350          225
                                             ------------ ------------
     Total current assets                        107,508       77,733
                                             ------------ ------------
 Property and equipment, net                       2,270        1,942
 Goodwill                                         17,748        5,500
 Intangibles, net                                  3,611            -
 Deferred income taxes                                 -        1,320
 Other assets                                        332          354
                                             ------------ ------------
   Total assets                              $   131,469  $    86,849
                                             ============ ============

                 Liabilities and Stockholders' Equity
 Current liabilities
   Accounts payable                          $    33,391  $    19,753
   Accrued commissions                             2,038        1,734
   Accrued income taxes                              283          200
   Accrued sales and use tax                       1,167          785
   Accrued expenses, other                         2,288        1,775
   Sublease reserve current                          335          360
   Deferred revenue from customer support
    contracts                                     52,014       33,472
                                             ------------ ------------
Total current liabilities                         91,516       58,079
 Deferred rent                                       226          167
 Deferred income tax liability                       537            -
 Sublease reserve non-current                        946        1,281
                                             ------------ ------------
     Total liabilities                            93,225       59,527
                                             ------------ ------------

 Commitments and contingencies

 Stockholders' equity
   Common stock, $.001 par value, 50,000,000
    shares authorized, 12,476,419 and
    11,228,890 shares issued and outstanding
    as of December 31, 2007 and December 31,
    2006, respectively                                12           11
   Additional paid-in capital                     39,266       29,544
   Accumulated deficit                            (1,034)      (2,233)
                                             ------------ ------------
   Total stockholders' equity                     38,244       27,322
                                             ------------ ------------
     Total liabilities and stockholders'
      equity                                 $   131,469  $    86,849
                                             ============ ============

                         DATALINK CORPORATION
         RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME
                (In thousands, except per share data)
                             (Unaudited)

                                Three Months Ended Twelve Months Ended
                                   December 31,       December 31,
                                ------------------ -------------------
                                  2007     2006      2007      2006
                                -------- --------- --------- ---------

                                -------- --------- --------- ---------
Net earnings on a GAAP basis    $ 1,420  $  4,375  $  1,199  $  8,497
                                -------- --------- --------- ---------
Adjustments:

 Purchase accounting adjustment
  to deferred revenue                77         -       664         -
                                -------- --------- --------- ---------
  Total gross margin
   adjustments                       77         -       664         -
                                -------- --------- --------- ---------

 Stock based compensation
  expense included in sales and
  marketing                     $    48         6       173        18
 Stock based compensation
  expense included in general
  and administrative                 71        86       315       251
 Stock based compensation
  expense included in
  engineering                        13         8        28        24
 Integration costs                    -         -       442         -
 Amortization of intangible
  assets                            177         -       727         -
                                -------- --------- --------- ---------
  Total operating expense
   adjustments                      309       100     1,685       293
                                -------- --------- --------- ---------

 Reversal of tax valuation
  allowance                           0    (2,203)        0    (2,203)
 Income tax effect                 (162)     (909)     (987)   (2,634)
                                -------- --------- --------- ---------

Non-GAAP net earnings           $ 1,644  $  1,363  $  2,561  $  3,953
                                -------- --------- --------- ---------

Non-GAAP net earnings per share
 - Basic                        $  0.13  $   0.12  $   0.21  $   0.36
                                -------- --------- --------- ---------
Non-GAAP net earnings per share
 - Diluted                      $  0.13  $   0.12  $   0.21  $   0.36
                                -------- --------- --------- ---------

Shares used in non-GAAP per
 share calculation - Basic       12,306    11,001    12,156    11,006
                                -------- --------- --------- ---------
Shares used in non-GAAP per
 share calculation - Diluted     12,403    11,612    12,392    11,127
                                -------- --------- --------- ---------

                         DATALINK CORPORATION
                       STATEMENT OF CASH FLOWS
                            (In thousands)
                             (Unaudited)

                                                   Twelve Months Ended
                                                      December 31,
                                                     2007      2006
                                                   --------- ---------


Cash flows from operating activities:
 Net earnings                                      $  1,199  $  8,497
 Adjustments to reconcile net earnings to net cash
  provided by operating activities:
    Provision for bad debts                              46        36
    Depreciation                                      1,101       985
    Amortization of intangibles                         727         -
    Amortization of discount on short term
     investments                                        (31)        -
    Deferred income taxes                               421    (2,762)
    Deferred rent                                        59      (122)
    Amortization of sublease reserve                   (360)     (384)
    Stock based compensation expense                    516       293
    Loss on disposal of assets                           60       111
 Changes in operating assets and liabilities, net
  of effects from purchase of MCSI:
    Accounts receivable                              (2,960)   (3,558)
    Inventories                                      (6,186)      800
    Deferred customer support contract
     costs/revenues, net                              4,313     2,729
    Accounts payable                                  5,334        93
    Accrued expenses                                    800       527
    Other                                                11        86
                                                   -------------------
   Net cash provide by operating activities           5,050     7,331
                                                   -------------------

Cash flows from investing activities:
  Purchases of investments                           (2,446)        -
  Purchases of property and equipment                (1,234)     (562)
  Payment for purchase of MCSI, net of cash
   acquired                                          (1,837)        -
                                                   -------------------
   Net cash used in investing activities             (5,517)     (562)
                                                   -------------------

Cash flows from financing activities:
  Proceeds from issuance of common stock                394     2,697
  Tax withholding payments reimbursed by
   restricted stock                                    (140)        -
                                                   -------------------
   Net cash provided by financing activities            254     2,697
                                                   -------------------

Increase (decrease) in cash and cash equivalents       (213)    9,466
Cash and cash equivalents, beginning of period       22,900    13,434
                                                   -------------------
Cash and cash equivalents, end of period           $ 22,687  $ 22,900
                                                   ===================

# # #

Company contacts:

Investor Relations:
Kim Payne
Investor Relations Coordinator
Phone: 952-279-4794
Fax: 952-944-7869
e-mail: einvestor@datalink.com
web site: www.datalink.com

Analyst Contact:
Greg Barnum
Chief Financial Officer
Phone: 952-279-4816

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