Headquarters: Minnetonka
Founded: 1985
Revenues: $173.3 million (fiscal year ending September 30, 2007)
Employees: 600 (450 in U.S.)
Ticker: DGII (Nasdaq)
Web Site: digi.com
What It Does: Manufactures networking devices for computer systems
The bursting of the tech bubble buried a lot of companies. But a few, such as Minnetonka-based Digi International, a maker of networking systems—devices that coordinate or transfer data within a computer network—have survived and even thrived.
In late 1999, at the tipping point of the dot-com boom, Digi hired Joe Dunsmore to be its new chairman, president, and CEO.
“The company had been through five years of difficulty,” Dunsmore recalls. “Digi’s main product line had peaked out in the mid-’90s, and the company had been through a few different management teams.”
Dunsmore—whose background in the data communications and telecom sectors included executive positions at U.S. Robotics and Lucent—calmed the troops and assured them that conscientiously controlling costs and making difficult business decisions could steer Digi out of the storm.
Dunsmore worked to create a stable environment for the company’s employees, and he and his staff spent long hours with Digi’s core customers—original equipment manufacturers (OEMs) for computer makers, and computer hardware resellers—to reassure them that the company wasn’t going anywhere. “Digi still had a very strong brand to a broad set of OEM customers and value-added resellers,” Dunsmore notes.
While that loyalty among its long-time customers was appreciated, Dunsmore also had to acknowledge that Digi (founded in 1985 as DigiBoard) was focused on old technology and had become creatively stagnant—in fact, it hadn’t released a new product in years.
To foster innovation, Dunsmore and his then-new management team created the Digi Innovation Message Board, a clearinghouse for ideas and initiatives that led to the creation of products that are Digi’s bread and butter to this day, including its ZigBee sensors, now used in the company’s wireless networking products. “We’re driving a lot of idea generation internally,” Dunsmore says. What’s more, Digi’s products are made completely in Minnesota.
By 2003, when the rest of the surviving IT sector was still gathering its wits, Digi was back on solid financial and strategic ground, and it hasn’t let up since. Following years of declines, the company’s revenues grew by about 1 percent in 2003, then by 8 percent in 2004. In 2007, revenue increased by 19.8 percent.
That accelerated rate of growth has been fostered through a combination of acquisition and homegrown innovations. Its high-end wireless routers feature 3G (third-generation) mobile technology, offering increased data transfer speed. In addition, these routers have the capacity for user programmability, unusual in the networking business. By getting access to programming language, users can create custom applications.
In April, Digi bought Sarian Systems, the United Kingdom’s leading maker of wireless gateways and routers, as well as Utah-based wireless technology company MaxStream. “One hundred percent of Sarian’s revenue base is in the U.K. and Europe,” Dunsmore says. “That fits perfectly with our goals to grow internationally. Right now, the domestic market makes up 61 percent of our revenue, with the other 39 percent coming from international markets. I’d like it to be 60-40 in favor of international sales.”
Digi’s accelerating success hasn’t made the company complacent. “We’d like to drive our operating margins from 15 to 20 percent up to 20 to 25 percent,” he says. “We’d like to be a half-billion-dollar business within five years.”
