It's been tough to find big gainers in the tech space. But Datalink
In the second quarter, sales surged 39% to $39.8 million. During this time, net income increased from $446,000, or $0.04 per share, to $2 million, or $0.18 per share.
Datalink calls itself an "information storage architect." Translated from techspeak, this means it provides a host of services - analysis, design, implementation, and support - for companies that have huge amounts of data. Customers include Cingular Wireless, Harris Corporation, Fidelity National Financial
Datalink's benefits include protecting customers from downtime; recovering data when lost in a disaster; and maximizing the storage capacity of current systems.
With new regulations such as Sarbanes-Oxley, as well as increased use of Web-based applications, corporate America is awash in data. A recent IDC study forecasts data growth at 8% to 10% per year through 2007. It's a large market, expected to increase from $36 billion in 2005 to $40 billion by 2007.
"Storage is hot," according to Frank Slootman, the CEO of Data Domain, which develops next-generation storage products. "It may not be as visible at the macro level," he told me in an interview, "but there are multibillion-dollar tectonic shifts going on below the surface that create tremendous opportunities for companies on the right side of that shift."
So what is Datalink's competitive advantage? Data storage is becoming increasingly complex. Corporate IT managers must understand both the myriad storage products and the difficulties of implementing these products within companies with diverse operating systems, hardware, and software applications. With 15 years in the business, Datalink is an expert in such matters.
Datalink is relatively small, with a concentrated customer base -- one client accounts for about 20% of sales. Yet the company has built a solid offering for customers. What's more, management has taken steps to improve cost efficiencies and employee productivity. Given that the market conditions look positive going forward, Datalink also has a chance to be a long-term winner.
Fool contributor Tom Taulli does not own shares of companies mentioned in this article.