Digi International(R) Inc. (Nasdaq: DGII; http://www.digi.com) reported revenue of $41.4 million for the first fiscal quarter of 2009, compared with $44.6 million for the first fiscal quarter of 2008, a decrease of $3.2 million, or 7.2%.

"The Digi team continues to execute steadfastly on its strategy in a tough environment," said Joseph Dunsmore, Digi's CEO. "Digi is positioned with its balance sheet, strong operating margins, and market and product positioning, to gain share and emerge in a strengthened position, despite rapidly changing economic conditions."

Revenue from embedded products in the first fiscal quarter of 2009 was $18.0 million compared to $20.7 million in the first fiscal quarter of 2008, a decrease of $2.7 million, or 13.0%. Revenue from non-embedded products was $23.4 million in the first fiscal quarter of 2009 compared to $23.9 million in the first fiscal quarter of 2008, a decrease of $0.5 million, or 2.2%. Revenue from embedded products includes $1.0 million of Spectrum revenue in the first fiscal quarter of 2009. Revenue from non-embedded products includes Sarian-branded revenue of $3.1 million for the first fiscal quarter of 2009. Spectrum Design Solutions, Inc. and Sarian Systems, Inc. were acquired in April 2008 and July 2008, respectively. The weakening of the Euro and UK pound sterling had an unfavorable impact on revenue of $1.4 million in the first fiscal quarter of 2009 compared to the first fiscal quarter of 2008.

Revenue by geographic region is shown below:

Revenue by Geographic Region

(in millions)

Q1 09 v. Q1 08 Q1 09 v. Q1 08

Q1 2009 Q1 2008 Favorable Favorable

(Unfavorable) (Unfavorable)

EMEA (Europe, Middle

East and Africa) $ 13.3 (1) $ 11.1 $ 2.2 19.6%

Latin America 1.1 0.8 0.3 35.7%

North America 23.2 (2) 28.2 (5.0) -17.7%

Asia Pacific 3.8 4.5 (0.7) -15.4%

Total revenue $ 41.4 $ 44.6 $ (3.2) -7.2%

(1) Includes Sarian revenue of $3.1 million. (2) Includes Spectrum revenue of $1.0 million.

Gross profit was $21.2 million in the first fiscal quarter of 2009 compared to $23.9 million in the same period in the prior year. The gross margin was 51.4% in the first fiscal quarter of 2009 compared to 53.6% in the first fiscal quarter of 2008. The gross margin was lower in the first fiscal quarter of 2009 than in the comparable period a year ago due to unfavorable product mix within primarily the non-embedded products, including sales of Sarian non-embedded products which provide lower gross profit margins.

Total operating expenses in the first fiscal quarter of 2009 were $20.5 million, or 49.5% of revenue, compared to $19.3 million, or 43.3% of revenue, in the first fiscal quarter of 2008. The increase in operating expenses in the first fiscal quarter of 2009 compared to the same quarter in the prior year is primarily due to incremental ongoing operating expenses for Sarian and Spectrum.

Total other income, net decreased by $0.8 million in the first fiscal quarter of 2009 compared to the same quarter in the prior year due to a decrease in interest income, net of $0.5 million and foreign currency transaction losses of $0.3 million.

Reported net income was $1.0 million in the first fiscal quarter of 2009, or $0.04 per diluted share, compared to $3.7 million, or $0.14 per diluted share, in the first fiscal quarter of 2008. As a result of the extension in fiscal 2009 of the research and development tax credit for two additional years beyond calendar 2007, a benefit for research and development credits earned during the last three quarters of fiscal 2008 was recorded in the first quarter of fiscal 2009, resulting in an additional tax benefit of $0.4 million, or $0.01 per diluted share.

Digi's cash and cash equivalents and marketable securities balance, including long-term marketable securities, was $70.2 million at December 31, 2008, a decrease of $3.4 million from September 30, 2008. The decrease in the cash and cash equivalents and marketable securities balance at December 31, 2008 compared to the prior quarter is a result of payments for estimated income taxes, incentive compensation payments related to prior year company performance, and unfavorable changes in working capital. Please refer to the Condensed Consolidated Statements of Cash Flows which is included in this earnings release for additional cash flow details. At December 31, 2008, Digi's current ratio was 6.7 to 1 compared to 6.4 to 1 at September 30, 2008.

First Fiscal Quarter 2009 Business Highlights:

--In spite of the challenging economy, Digi's wireless revenue grew over

40% from the first fiscal quarter of 2008. With wireless revenue now

reaching 32.5% of revenue, Digi's wireless initiatives continue to

build momentum.

Digi's Wireless Drop-In Networking

-- With the Rabbit brand, Digi launched two new product lines. The ultra-

compact Rabbit MiniCore modules are smaller than a packet of sugar and

provide low-cost, easy to use, wired or wireless building blocks for

embedded devices. For the fastest time to market for a wireless

embedded device, Rabbit launched a new family of wireless single board

computers (SBCs). Embedded developers start with a virtually complete

piece of hardware and only have to add software and an enclosure to

create a product with Rabbit SBCs.

-- Digi increased its access to European M2M markets with the release of

868 MHz Wireless Modules and Device Adapters in the XBee product

family. These long range (up to 40km line of sight) products operate in

the 868 MHz frequency range that is popular in Europe.

-- Leveraging the recent Sarian acquisition, Digi launched a new line of

advanced enterprise class cellular routers. These devices are ideal

for remote transportation, lottery, financial, retail and enterprise

backup applications.

-- Digi released the industry's first 802.11a/b/g secure embedded

networking core module, the ConnectCore(TM) Wi-9P 9215. This module is

ideal for devices that are located in environments with a lot of

wireless interference, like hospitals, manufacturing facilities, and

airports.

Other Launches

-- Increasing its access to Linux markets, Digi launched the industry's

smallest Linux embedded device server. About the size of a pair of dice,

the high-performance Digi Connect ME 9210 allows OEMs to easily add

secure Ethernet connectivity using Linux in space-constrained devices.

Fiscal 2009 Guidance

Digi expects revenue for the second fiscal quarter of 2009 in a range of $40 million to $46 million, and earnings per diluted share in a range of $0.01 to $0.07. As previously announced in its pre-release on January 5, 2009, Digi projects annual revenue in a range of $170 million to $200 million. Digi projects GAAP earnings per diluted share to be in a range of $0.19 to $0.47.

First Fiscal Quarter 2009 Conference Call Details

Digi invites all those interested in hearing management's discussion of its quarter, on Thursday, January 22, 2009 after market close at 5:00 p.m. EST (4:00 p.m. CST), to join the call by dialing (866) 700-6293 and entering passcode 92000866. International participants may access the call by dialing (617) 213-8835 and entering passcode 92000866. A replay will be available two hours after the completion of the call, and for one week following the call, by dialing (888) 286-8010 for domestic participants or (617) 801-6888 for international participants and entering access code 38683029 when prompted. Participants may also access a live webcast of the conference call through the investor relations section of Digi's website, http://www.digi.com.