Technology moves at such a rapid pace that a company enjoying strong demand for the technology products and services it provides can quickly fall victim to the introduction of more efficient and cost-effective solutions, observes Taesik Yoon, editor of Forbes Investor.
Datalink (DTLK), a data center infrastructure and services provider, has experienced this first hand as newer flash-based storage models and rising cloud technologies have negatively impacted demand for its bread and butter storage solutions.
As a result, earnings in 2014 fell for the first time in five years. But this disappointing performance is overshadowing the actions DTLK has taken to address the evolving storage landscape and become a broader provider of IT infrastructure and services.
As these newer technology offerings started to emerge, DTLK began taking steps to expand beyond its traditional storage business and transform itself into a broader, more diversified provider of IT infrastructure and services over the past several years.
This has resulted in the addition of new collaboration, security, wireless, and networking products and services to the company’s portfolio, which enabled DTLK to successfully enter new markets—such as security and software-defined data centers—and increase its relevance with its customers.
We think the benefits of this success, coupled with a more favorable corporate IT spending environment, will result in a significant rebound in both earnings and share value in the current year.
DTLK acts as a one-stop shop for DTLK’s clients by providing them with all their data center infrastructure needs. Each solution is built using a customized platform of hardware and software from multiple technology vendors.
Further benefits from the company’s increasing scale, coupled with our expectations for better customer spending trends, is why DTLK expects organic sales to rise 8% after declining in the prior year and earnings to nearly triple to 17 cents per share in the current quarter.
We think this will set the stage for a much better year in 2015. As such, we are adding the stock to our core growth portfolio.
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