Datalink plans cuts after soft quarter
Datalink Corp. missed revenue and earnings expectations when the Eden Prairie provider of data center services and solutions reported its second quarter results on July 30.
Profit margin was down as the company's sales mix tilted more toward its lower margin networking hardware sales. That trend is looking like the new normal to Lake Street Capital Markets analyst Eric Martinuzzi. "We have bitten the bullet and lowered our gross margin assumptions for 2015 and 2016," Martinuzzi wrote in a note. "What was once a near 23 percent gross margin business in now trending around 20 percent."
Datalink, responding to the soft quarter, said it intends to cut $10 million in costs through layoffs and other actions. About $2 million of those costs will be realized in the fourth quarter and the remainder in 2016.
Nortech Systems' acquisition questioned
Nortech Systems reported on Wednesday that it recorded a loss of 14 cents per share for the second quarter on sales of $26.8 million, which were down 2.2 percent from the same quarter a year ago.
During the quarter, Nortech announced the acquisition of Devicix in Eden Prairie for at least $5.3 million, more based on earn outs. That acquisition was questioned by a group of investors who sent a letter to management on June 24.
Mutiny Capital members were concerned over an acquisition price that could represent as much as 60 percent of the company's total market capitalization and what they believed was a lack of specifics on what Nortech was getting and what it would contribute.
The group's spokesman, Kyle Packer, raised more questions to management on Nortech's earnings conference call Thursday. Packer was less than satisfied with management's answers. "We are deeply concerned about the choice of allocation of capital," Packer said on the call. "As shareholders, you guys have diluted us like crazy."
Remodel is a fail at Famous Dave's
Alex Fuhrman, an analyst with Craig Hallum Capital Group, cut Famous Dave's to a "hold" after the barbecue chain said planned changes to the menu and restaurants were a mistake. Yet Fuhrman still believes in Dave's long-term potential. "The company is still one of the largest barbecue chains in the country and has the potential to diversify into other small-box formats that diversify its business in day parts, geography and price point," Fuhrman wrote. "Between now and then, however, there is a lot of heavy lifting."