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Digi International Reports Third Quarter 2006 Revenue Growth of 18.7% from Third Quarter 2005

Minneapolis—July 17, 2006—Digi International, Inc. (NASDAQ: DGII) reported revenue of $35.9 million compared to $30.2 million during the same quarter of fiscal 2005, an increase of $5.7 million, or 18.7%. The increase was primarily attributable to increased revenue from growth products and acquired products, offset in part by a decline in mature product lines.

Gross profit margin in the third quarter of 2006 was 57.6% compared to 60.3% during the same quarter of fiscal 2005. This decline was caused by product mix changes, higher manufacturing expenses, and the higher percentage of Rabbit® product sales in comparison to the third quarter of 2005.

Total operating expenses in the third quarter of 2006 were $16.9 million, compared to $14.5 million in the third quarter of 2005. The increase was primarily due to acquisitions completed in the third quarter of 2005. Digi also recorded a $0.6 million pre-tax charge in the third quarter of 2006 for stock-based compensation as a result of the adoption of Statement of Financial Accounting Standards No. 123R, "Share-Based Payment" (FAS 123R), in the first quarter of 2006. A charge of $0.3 million for acquired in-process research and development due to the acquisition of Rabbit® is included in operating expenses for the third quarter of 2005.

Digi's effective income tax rate for the third quarter of 2006 was 22.6% compared to 37.7% in the third quarter of 2005. The decrease in the effective tax rate was primarily due to recovery of additional discrete tax benefits in the third quarter of 2006.

Digi reported net income of $3.3 million for the third quarter of 2006, or $0.14 per diluted share, compared to $2.5 million, or $0.11 per diluted share, for the third quarter of 2005. Stock-based compensation expenses reduced Digi's earnings per diluted share by $0.02 for the third quarter of 2006. Earnings per diluted share were $0.16, excluding the impact of stock-based compensation expenses.

For the nine months ended June 30, 2006, Digi reported revenue of $103.6 million, compared to $89.0 million for the nine months ended June 30, 2005, an increase of $14.6 million, or 16.4%. For the nine months ended June 30, 2006, Digi reported net income of $8.1 million, or $0.34 per diluted share, compared to $14.2 million, or $0.61 per diluted share, for the nine months ended June 30, 2005. Stock-based compensation expenses reduced earnings per diluted share by $0.05 for the first nine months of 2006. Earnings per diluted share, excluding the impact of stock-based compensation expenses, were $0.39 for the first nine months of 2006. As a result of a settlement with the Internal Revenue Service on an audit of prior fiscal years, Digi recorded a reversal of $5.7 million of previously established income tax reserves, equating to $0.24 per diluted share positive impact in the second quarter of 2005. Excluding the impact of the favorable tax settlement, earnings per diluted share would have been $0.37 for the first nine months of 2005.

Digi's current ratio is 4.9 to 1, and the Company has no debt other than capital lease obligations. Digi's cash and cash equivalents and marketable securities balance at the end of the third quarter was $65.9 million, up $5.9 million from the end of the prior quarter. Digi's cash per share on June 30, 2006, defined as cash and cash equivalents and marketable securities divided by shares outstanding as of June 30, 2006 of 23,140,330, was $2.85.

"We are pleased with the positive revenue and earnings results and momentum that we have established," said Joe Dunsmore, Digi's Chief Executive Officer

Third Quarter Highlights

Fourth Fiscal Quarter 2006 Guidance
For the fourth quarter of fiscal 2006, Digi expects revenue to be in the range of $34.5 million to $39.5 million. Digi expects fourth quarter earnings per diluted share to be in the range of $0.11 to $0.18, excluding the impact of stock-based compensation expenses of $0.02 per diluted share. Digi estimates reported earnings per diluted share, including the impact of stock-based compensation expenses, will be $0.09 to $0.16.

For the full year, Digi forecasts revenues to be in the range of $138 million to $143 million, or a 10% to 14% increase from 2005. Digi expects 2006 earnings per diluted share to be in the range of $0.50 to $0.57, excluding the impact of stock-based compensation expenses. Digi estimates that stock-based compensation expenses will reduce earnings per diluted share by approximately $0.07 per diluted share for the full fiscal year. Digi estimates reported earnings per diluted share, including the impact of stock-based compensation expenses, will be in the range of $0.43 to $0.50 for the 2006 fiscal year.

Third Quarter Fiscal 2006 Conference Call Details
Digi invites all those interested in hearing management's discussion of the quarter to attend its third quarter fiscal 2006 conference call, scheduled for Monday, July 17, 2006, at 4:00 p.m. CT, either by phone or via the Internet. Participants can access the call by dialing (212) 676-5250. A replay will be available for one week following the call by dialing (800) 633-8284 for domestic participants or (402) 977-9140 for international participants, and entering access code 21298290 when prompted. Participants may also access a live Web cast of the conference call through the investor relations section of Digi's website, www.digi.com.

About Digi International
Digi International, based in Minneapolis, makes device networking easy by developing easy to use and cost effective products and technologies. Digi markets its products through a global network of distributors and resellers, systems integrators and original equipment manufacturers (OEMs).

Forward-looking Statements
This press release contains statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which generally can be identified by the use of forward-looking terminology such as "anticipate," "believe," "target," "estimate," "may," "will," "expect," "plan," "project," "should," or "continue" or the negative thereof or other variations thereon or similar terminology. Such statements are based on information available to management as of the time of such statements and relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market and statements regarding the Company's mission and vision. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, including risks related to the highly competitive market in which the Company operates, rapid changes in technologies that may displace products sold by the Company, declining prices of networking products, the Company's reliance on distributors, delays in the Company's product development efforts, uncertainty in consumer acceptance of the Company's products, and changes in the Company's level of revenue or profitability. These and other risks, uncertainties and assumptions identified from time to time in the Company's filings with the Securities and Exchange Commission, including without limitation, its annual report on Form 10-K for the year ended September 30, 2005 and its quarterly reports on Form 10-Q, could cause the Company's future results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. Many of such factors are beyond the Company's ability to control or predict. These forward-looking statements speak only as of the date for which they are made. The Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Digi International Inc.
Condensed Consolidated Statement of Operations

Digi International Inc.
Condensed Consolidated Balance Sheet

Digi International Inc.
Condensed Consolidated Statement of Cash Flows

Investor Contacts:
S. (Kris) Krishnan
Digi International
952-912-3125
Email: S. (Kris) Krishnan

Tom Caden
Dian Griesel Inc.
212-825-3210
Email: Tom Caden

For more information, visit Digi's Web site at www.digi.com, or call 877-912-3444 (U.S.) or 952-912-3444 (International).

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