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Digi International Reports Fourth Fiscal Quarter and Full Year 2009 Results

(Minneapolis, MN, October 29, 2009) - Digi International® Inc. (NASDAQ: DGII, www.digi.com)

Financial highlights for the quarter and fiscal year ended September 30, 2009 include:

"Although our fiscal 2009 financial results were challenged by the current worldwide economic environment, we are nonetheless pleased to report our twenty-seventh consecutive quarter of profitability, a very strong balance sheet, and the strengthening of the company's product position in 2009," said Joe Dunsmore, Digi's Chief Executive Officer. "This year Digi introduced 21 new products, entered the satellite M2M market with the acquisition of MobiApps, partnered with several leaders in the Smart Grid sector to bring cutting-edge technology to energy suppliers and consumers, and was chosen for inclusion in a new NASDAQ Smart Grid Infrastructure Index."

Below is a table setting forth certain GAAP and Non-GAAP results:

Business Results for the Three Months Ended September 30, 2009

Digi reported revenue of $40.0 million for the fourth fiscal quarter of 2009 compared to $50.4 million for the fourth fiscal quarter of 2008, a decrease of $10.4 million, or 20.6%.

Revenue from embedded products in the fourth fiscal quarter of 2009 was $18.8 million compared to $23.5 million in the fourth fiscal quarter of 2008, a decrease of $4.7 million, or 19.9%. Revenue from non-embedded products was $21.2 million in the fourth fiscal quarter of 2009 compared to $26.9 million in the fourth fiscal quarter of 2008, a decrease of $5.7 million, or 21.3%. The strengthening of the US dollar compared to the Euro and UK pound sterling in the fourth fiscal quarter of 2009 compared to the same quarter a year ago had an unfavorable impact on revenue of $0.3 million.

Revenue by geographic region is shown below:

Gross profit was $19.4 million in the fourth fiscal quarter of 2009 compared to $25.9 million in the same period in the prior year. The gross margin was 48.5% in the fourth fiscal quarter of 2009 compared to 51.5% in the fourth fiscal quarter of 2008, a decline of 3.0 percentage points. The gross margin was lower in the fourth fiscal quarter of 2009 than in the comparable period a year ago due to unfavorable product mix within both the embedded and non-embedded products.

Total operating expenses in the fourth fiscal quarter of 2009 were $18.3 million, or 45.8 % of revenue, compared to $20.8 million, or 41.3% of revenue, in the fourth fiscal quarter of 2008. The decrease in operating expenses in the fourth fiscal quarter of 2009 compared to the same quarter in the prior year is primarily due to savings from the restructuring plan announced in the third quarter of fiscal 2009 and the elimination of the incentive compensation program for fiscal 2009, offset partially by incremental ongoing operating expenses for Spectrum and MobiApps.

Net income was $1.0 million in the fourth fiscal quarter of 2009, or $0.04 per fully diluted share, compared to $3.6 million, or $0.14 per fully diluted share, in the fourth fiscal quarter of 2008. Non-GAAP net income and net income per fully diluted share for the fourth fiscal quarter of 2009 and 2008 were $0.7 million, or $0.03 per fully diluted share, and $4.0 million, or $0.16 per fully diluted share, respectively, as detailed elsewhere in this earnings release.

Business Results for the Twelve Months Ended September 30, 2009

For the twelve months ended September 30, 2009 (fiscal 2009), Digi reported revenue of $165.9 million compared to revenue of $185.1 million for the twelve months ended September 30, 2008 (fiscal 2008), a decrease of $19.2 million, or 10.3%. Revenue from embedded products in fiscal 2009 was $74.7 million compared to $86.6 million in fiscal 2008, a decrease of $11.9 million, or 13.8 %. Revenue from non-embedded products was $91.2 million in fiscal 2009 compared to $98.5 million in fiscal 2008, a decrease of $7.3 million, or 7.3%. Revenue from embedded products in fiscal 2009 includes $4.5 million of Spectrum revenue and $0.4 million of MobiApps revenue. Revenue from embedded products in fiscal 2008 includes $0.8 million of Spectrum revenue from date of acquisition. Revenue from non-embedded products includes Sarian-branded revenue of $16.2 million and $5.7 million for fiscal 2009 and fiscal 2008, respectively.

For the twelve months ended September 30, 2009, Digi reported net income of $4.1 million, or $0.16 per fully diluted share, compared to net income for the twelve months ended September 30, 2008, of $12.4 million, or $0.47 per fully diluted share. Net income for fiscal 2009 was reduced by the charge for restructuring expenses of $1.9 million, net of tax, or $0.07 per fully diluted share, offset partially by tax benefits of $1.2 million, or $0.05 per fully diluted share, resulting from the reversal of tax reserves associated with the extension of the research and development credit, the resolution of certain state tax matters, and the closing of a prior tax year. Net income for fiscal 2008 was reduced by the charge for in-process research and development and other expenses associated with the acquisition of Sarian of $2.1 million, or $0.08 per fully diluted share and the write-down of an impaired investment of $0.7 million, or $0.03 per fully diluted share, partially offset by a tax benefit of $0.5 million, or $0.02 per fully diluted share, resulting from the reversal of tax reserves associated with the closure of a prior tax year.

Digi's cash and cash equivalents and marketable securities balance, including long-term marketable securities, was $75.8 million at September 30, 2009, an increase of $8.9 million over the cash and cash equivalents and marketable securities balance at June 30, 2009, and an increase of $2.1 million over the comparable balance at September 30, 2008. Digi re-purchased 893,162 shares of stock during fiscal 2009 for $6.6 million and spent approximately $3.0 million for the acquisition of substantially all of the assets of MobiApps. Please refer to the Condensed Consolidated Statement of Cash Flows included in this earnings release for additional cash flow details. At September 30, 2009, Digi's current ratio was 7.4 to 1 compared to 6.4 to 1 at September 30, 2008.

Fiscal 2009 Business Highlights:

Recognition

Key Partnerships and Customer Relationships

iDigi Bundled Wireless Solutions

Wireless Acquisition

Digi Innovation

Guidance

Digi projects revenue in a range of $40 million to $44 million for the first fiscal quarter of 2010, and net income per fully diluted share in a range of $0.02 to $0.08.

For the full year fiscal 2010, Digi projects revenue in a range of $¬¬165 million to $190 million, or an increase of 0% to 14.5% over fiscal year 2009. Digi projects net income per fully diluted share to be in a range of $0.16 to $0.42.

Fourth Quarter and Year-End 2009 Conference Call Details

Digi's management will discuss the fourth quarter and year-end results, on Thursday, October 29, 2009, after market close at 5:00 p.m. EST (4:00 p.m. CST). To join the call, please dial (866) 783-2145 and enter pass code 49615082. International participants may access the call by dialing (857) 350-1604 and entering pass code 49615082. 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 36829880 when prompted. Participants may also access a live webcast of the conference call through the investor relations section of Digi's website, www.digi.com.

About Digi International

Digi International is making wireless M2M easy by developing reliable products and solutions to connect and securely manage local or remote electronic devices over the network or via the Web. Digi offers the highest levels of performance, flexibility and quality, and markets its products through a global network of distributors and resellers, systems integrators and original equipment manufacturers (OEMs). For more information, visit Digi's Web site at www.digi.com, or call 877-912-3444. For more news and information on Digi International® Inc., please visit www.IRGnews.com/coi/DGII where you can find the CEO's video, a fact sheet on the company, investor presentations, and more.

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, continued or increasing weakness in North America and developing weakness in other regions due to changes in economic conditions, the current uncertainty in global economic conditions which could negatively affect product demand, the recent financial crises affecting the banking system and financial markets which could negatively impact the financial solvency of the Company's customers and suppliers, the extreme volatility in fixed income, credit and equity markets which could result in actual amounts realized on the Company's debt securities or other investments that differ significantly from current market values, the ability to achieve the anticipated benefits and synergies associated with acquisitions, 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, 2008 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.

This release includes non-GAAP operating income, earnings before taxes, depreciation and amortization (EBTDA), net income and earnings per diluted share data. Management understands that there are material limitations on the use of non-GAAP measures. Non-GAAP measures are not substitutes for GAAP measures, such as operating income, income before income taxes, or net income, for the purpose of analyzing financial performance. The disclosure of these measures does not reflect all charges and gains that were actually recognized by the Company. These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Digi believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Digi's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Digi's results of operations in conjunction with the corresponding GAAP measures. Additionally, management understands that EBTDA does not reflect the Company's cash expenditures, the cash requirements for the replacement of depreciated and amortized assets, or changes in or cash requirements for the Company's working capital needs.

Digi believes that providing operating income and net income and earnings per diluted share exclusive of the impact of restructuring expenses, in-process research and development and other acquisition-related expenses, the write down of impaired investments, and the impact of the reversal of tax reserves and other discrete tax benefits permits investors to compare results with prior periods that did not include these items. Management uses the aforementioned non-GAAP measures to monitor and evaluate ongoing operating results and trends and to gain an understanding of the comparative operating performance of the Company. In addition, shareholders in the Company have expressed an interest in seeing financial performance measures exclusive of the impact of decisions relating to restructuring charges, acquisitions, investments and taxes, which while important, are not central to the core operations of Digi's business. Additionally, management believes that the presentation of EBTDA as a percentage of net sales is useful to investors because it provides a reliable and consistent approach to measuring the Company's performance from year to year and in assessing the Company's performance against other companies. Management believes that such information helps investors compare operating results and corporate performance exclusive of the impact of the Company's capital structure and the method by which assets were acquired. EBTDA is also used by management as a metric for executive compensation, as well as incentive compensation for the rest of the employee base, and it is monitored quarterly for these purposes.

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).

All brand names and product names are trademarks or registered trademarks of their respective companies.

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