Datalink Reports 2007 Third-Quarter Operating Results.

Third Quarter 2007 Sales Rise 38 Percent over 2006

MINNEAPOLIS -- Datalink Corporation (Nasdaq:DTLK), a leading independent information storage architect, reported results for its third quarter and nine months ended September 30, 2007. Revenues for the quarter ended September 30, 2007, were $45.8 million compared to $33.2 million for the prior-year period and $40.3 million in the second quarter of 2007. Revenues for the nine months ended September 30, 2007, were $127.1 million compared to $107.3 million for the prior-year period. Datalink's results for the third quarter and the first nine months of 2007 include three and eight months of Midrange Computer Solutions, Inc. (MCSI) results of operations, respectively, following the acquisition which closed on January 31, 2007.

GAAP Results

On a GAAP basis, the company reported net earnings of $844,000, or $0.07 per diluted share for the third quarter ended September 30, 2007. This compares to net earnings of $1.3 million, or $0.11 per diluted share, in the third quarter of 2006. For the nine months ended September 30, 2007, the company reported a net loss of $221,000, or $0.02 per diluted share, compared to net earnings of $4.1 million, or $0.38 per diluted share, in the first nine months of 2006.

Non-GAAP Results

Non-GAAP net earnings for the third quarter of 2007 was $1.1 million, or $0.09 per diluted share, compared to non-GAAP net earnings of $790,000 or $0.07 per diluted share, in the third quarter of 2006. For the nine months ended September 30, 2007, the company reported non-GAAP net earnings of $898,000, or $0.07 per diluted share, compared to net earnings of $2.6 million, or $0.23 per diluted share, in the first nine months of 2006.

"Overall, we are pleased with our results for the quarter. We were able to return to profitability and we made good progress against the key initiatives that we outlined earlier in the year," commented Charlie Westling, Datalink's president and chief executive officer.

"These initiatives include:

* Increasing employee productivity. Employee productivity, as measured by gross profit dollars per employee, increased 17 percent in the third quarter over the second quarter of this year;

* Completing the integration and realignment of our field engineering and customer support teams. Our total services revenue was over $18.1 million in the third quarter which represented the highest quarterly amount in the company's history, and our professional services revenue was also at a record quarterly high; and

* Increasing new customer activity. Nine new customers each generated more than $100,000 of revenue in the third quarter, in part due to the success of marketing and lead generation campaigns that we launched earlier in the year."

Highlights for the third quarter of 2007 included:

* An increase in overall gross profit margin to 25.9 percent in the third quarter compared to 25.2 percent in the second quarter of 2007 and 24.1 percent in the first quarter of 2007; this increase was driven primarily by higher margin Datalink-delivered professional services revenue;

* Operating income margin, on a GAAP basis, increased to 2.5 percent in the third quarter versus a margin loss of 0.2 percent in the second quarter of this year. The combination of stronger revenue growth and continued improvement in expense management led to the increased operating margin; and

* Cash and cash equivalents remained strong, totaling $22.1 million at September 30, 2007.

Outlook

The company ended the quarter with a backlog of $25 million, compared to $30 million at the end of the second quarter of 2007. The decrease in backlog is attributed to soft bookings activity in August and the first part of September. "We saw an increase in bookings activity the last few weeks of September, and the first few weeks of October, and we are cautiously optimistic that we will see more aggressive storage spending over the rest of the quarter as many of our customers take advantage of the availability of year end budget dollars. The combination of these factors leads us to believe that we will see sequential growth in the fourth quarter," continued Westling. The company expects revenue between $47 million and $52 million, with GAAP net earnings to be between $0.06 to $0.11 per diluted share in the fourth quarter of 2007. On a non-GAAP basis, the company expects fourth quarter earnings per share to be in the range of $0.08 to $0.13 per diluted share. Non-GAAP earnings per share exclude the effect of particular 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 quarter.

Conference Call and Webcast Today

Datalink will hold a conference call today at 4:30 p.m. Central Time to discuss the third quarter results. Those wishing to participate can access the call by dialing [phone] (no later than 4:25 p.m. Central Time). Participants will be asked to identify the Datalink conference call and provide the designated identification number (18597430). A live webcast of the conference call can be heard via Datalink's website at www.datalink.com.

About Datalink

Datalink Corporation is an information storage architect. The company analyzes, 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.

Forward Looking Statements

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 2007 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 our MCSI acquisition and possible future acquisitions; fluctuations in our quarterly operating results; future changes in applicable accounting rules; and volatility in our stock price. We may not achieve significant future revenues from one of our customers that accounted for approximately 12 percent of our first quarter 2007 revenues. Further, our revenues for any particular quarter are not necessarily reflected by our backlog of contracted orders, which also may fluctuate unpredictably. In addition, we cannot assure that we will successfully and profitably integrate MCSI's customers and personnel into our business or increase our gross margins with MCSI's historical customers and prospects.

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. The 2006 results also reflect the impact of each quarter being fully taxed at an effective rate of 43%. 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.

[TABLE OMITTED]
[TABLE OMITTED]
[TABLE OMITTED]
[TABLE OMITTED]