Pinnacle Data Systems Completes Acquisition Of GNP Computers

8/18/2005 - Pinnacle Data Systems, Inc. (PDSi) (AMEX: PNS) announced the completion of its strategic acquisition of the assets of privately-held GNP Computers, Inc. (GNP), located near Los Angeles, California.

PDSi acquired approximately $8 million in GNP assets, which consist mainly of accounts receivable, inventory and fully-depreciated fixed assets, for a purchase price of approximately $8 million in assumed current liabilities. PDSi also assumed GNP's building lease of 56,000 square feet, hired 54 GNP employees and currently employs about 18 temporary employees in the suburban Monrovia, California, location. PDSi also acquired a GNP sales office in Singapore.

The acquisition is being financed through PDSi's line of credit with KeyBank National Association and the current cash flow of the combined businesses, with the combined company having no long-term debt. PDSi's line of credit was recently increased from $6 million to $11 million in anticipation of the acquisition and the combined company's projected borrowing needs.

GNP revenues were $21 million in 2004. The company was founded in 1981 and offers computer system design, manufacturing, and life-cycle management for original equipment manufacturers (OEMs) in a broad range of industries. GNP provides significant turn-key product programs to customers that PDSi does not currently serve, as well as more mature product development and manufacturing capabilities that complement PDSi's current product and service lines.

Pro forma financial information for PDSi and GNP is expected to be filed with the Securities and Exchange Commission before the end of October 2005.

PDSi's growth strategy includes both organic growth and growth by acquisition. "We see a large opportunity in the embedded computer services industry to consolidate high quality niche players and better serve the growing demand for out-sourced design, manufacturing and support services from original equipment manufacturers across several vertical markets," said Christopher L. Winslow, President and Chief Operating Officer. "The acquisition also increases our global marketing presence to cover North America, Europe and Asia. PDSi now has sales offices in Boston, Columbus, Dallas, Los Angeles, San Francisco, The Netherlands (through partner Kender-Thijssen) and Singapore."

John D. Bair, Chairman and CEO, commented, "We are very pleased to have completed this transaction with GNP. It will help us accomplish all three of the strategic goals we established for 2005 and accelerate the achievement of our longer term strategic objectives. Specifically, it grows revenues and increases the number of customers we have across our targeted industry segments (medical, telecommunications, computer, industrial, imaging and defense equipment); expands our product portfolio and services capabilities; and, further strengthens our team and operating methodologies. We remain focused on serving Fortune Global 500 companies and innovative market leaders taking advantage of the trend toward increased business process outsourcing. This transaction is expected to contribute to the achievement of our strategic goal of $100 million in annual revenues with improved long-term profitability. We expect related transition and integration costs to impact earnings into the first half of 2006."

About PDSi
PDSi provides product life-cycle service solutions to Original Equipment Manufacturers (OEMs) in the medical, telecommunications, computer, industrial, imaging and defense equipment industries, among others. PDSi offers a full range of computer and computer-related product development and manufacturing services to increase product speed to market and engineered product life, and service and support solutions for units in the field through comprehensive product life-cycle management programs encompassing depot repair, advanced exchange, contact center support and end-of-life control. For more information, visit the PDSi Website at

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