Digi International Inc, the Minneapolis-based provider of LAN datacoms hardware and software, has weighed in with one of the few positive pre-announcements of the quarter in the technology sector – but delivered some bad news at the same time. The company said its earnings for the fiscal third quarter ended June 30 will come in at $0.37 to $0.39 per share, up from the $0.35 per share that analysts surveyed by First Call were previously expecting. The quarter will benefit from a $1.3m reduction in non-operating expenses as result of the release from certain lease obligations. But Digi also warned that fourth-quarter results won’t be in the same range as the third-quarter numbers, due to changes in product mix, higher costs associated with the rollout of new products and the impact of the recently-announced acquisition of Central Data Corp and the pending acquisition of ITK International Inc. First Call had been expecting earnings for the quarter of $0.38. Digi said it intends to write off a substantial portion of the purchase price for the two companies as acquired in-process research and development, in addition to taking restructuring charges associated with the ITK deal of $1m to $2m. Digi shares responded to the news by falling $3.50, or nearly 14%, to close at $21.5625. The company will announce full third-quarter results on July 23.
