Digi 4Q tops estimates

Digi International Inc. (Nasdaq: DGII) said Thursday that net income for the fourth quarter was $2.7 million, or 18 cents a share, topping First Call's expectation of 13 cents a share. The better-than-expected results came courtesy of improving gross margins. Revenue, however, was flat.

Shares of the voice and data communications hardware and software vendor closed at 14 9/16 Wednesday. The stock has been slowly reclaiming its former highs after it tanked and restructured in its second quarter.

The company has attained profitability after recording a net loss of $15 million, or $1.05 a share, in the year-ago period. Income, excluding amortization of intangible assets acquired through business combinations, charges for acquired in-process research and development and related deferred tax benefits, increased 84 percent to $4.6 million, or 31 cents a share in the fiscal fourth quarter, versus $2.5 million or 17 cents a share, in the year ago period.

Revenue was $48.3 million, down slightly from $48.8 million in the year-ago period. Reductions in certain manufacturing and other operating costs and charges gave Digi operating income of $6.7 million for the quarter versus an operating loss of $14.7 million in the comparable quarter of 1998.

Though Digi's revenues were flat, profitability improved: gross margin increased 200 basis points to 54 percent versus the prior year fourth quarter, said Digi chairman, John Schinas in a press release. The company said it expects the ramp-up in its new RAS product line to fuel growth in the future. Digi said it also expects to introduce enhanced multifunction features to the RAS products that will be competitive in the Computer Telephony Integration (CTI) market.

Digi also reported that for the 1999 fiscal year, net income increased to $3.2 million, or 22 cents a share, versus a net loss of $71,000, or a penny a share in fiscal 1998. Revenue increased 6 percent in fiscal 1999 to $194 million versus $183 million in fiscal 1998.