PDSi Enters OEM Agreement With IBM

COLUMBUS, OH--(Marketwire - Jul 26, 2011) - Pinnacle Data Systems, Inc. ("PDSi") (NYSE Amex: PNS) announced today that it has entered into an Original Equipment Manufacturer (OEM) agreement with IBM. This agreement provides PDSi with the ability to design and sell products based upon IBM's System p and System x technologies.

John D. Bair, PDSi's Chairman of the Board, President and Chief Executive Officer, stated, "PDSi's exceptional engineering and operational capabilities complement IBM's product and technology offerings. This agreement provides PDSi access to IBM's market leading technologies that can be leveraged across all three of our targeted market segments. For Embedded Computing, with an estimated market size of $5 billion, we are working on developing NEBS certified products for the telecommunications ("telco") industry, as well as products designed for other applications. This also broadens the technology platforms we can offer in the more than $100 billion Integrated / ODM Computing Solutions segment as we design and build custom solutions for customers in the telco, medical, and other industries with specialized requirements such as ruggedization. In the Electronic Repair Services Segment, this opens up access to whole new markets seeking to extend the life-cycle of IBM-based technologies."

Mr. Bair continued. "The key to our past Product success has been partnerships in value-added design and integration services. Maintaining and developing new partnerships with industry leading technology companies provides us access to products and technology we can use in targeted Integration opportunities -- both as a Value Added Reseller, or VAR, and as an Original Equipment Manufacturer, or OEM."

Timothy J. Harper, PDSi's Chief Operating Officer, added, "We have substantially grown our Service business over the past year, and our current focus is on driving profitable growth in our Products business. This agreement is a key strategic milestone positioning PDSi for growth. This agreement not only adds to our capability in developing leading technology product offerings, but also opens up new routes to market leveraging IBM's extensive business development resources."

About PDSi

PDSi is a global provider of Electronics Repair and Reverse Logistics Services, ODM/OEM Integrated Computing Services, and Embedded Computing Products and Design Services for the Diversified Computing, Telecom, Imaging, Defense/Aerospace, Medical, Semiconductor and Industrial Automation markets. PDSi provides a variety of engineering and manufacturing services for global OEMs requiring custom product design, system integration, repair programs, warranty management, and/or specialized production capabilities. With facilities in the U.S., Europe and Asia, we ensure seamless support for solutions all around the world.

More than just an ODM, integrator or reverse logistics provider, PDSi's engineering, technical and operational capabilities span the entire product lifecycle allowing us to better understand and develop custom solutions for each of our customer's unique requirements. Our product capabilities range from board-level designs to globally certified, fully integrated systems, specializing in long-life computer products and unique, customer-centric solutions. Our capability to perform higher-level repair services in-region allows us to customize solutions for our customers so that they can deliver world-class service levels to their customers with reduced logistics, component replacement and inventory costs.

"PDSi puts computer technologies to work for our customers."

For more information, visit the PDSi website at www.pinnacle.com.

Safe Harbor Statement

Portions of this release include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, but not limited to, statements regarding the Company achieving its financial growth and profitability goals, or its sales, earnings and profitability expectations for the year ending December 31, 2011. The words "believe," "expect," "anticipate," "estimate," "intend," "seek," "may" and similar expressions identify forward-looking statements that speak only as of the date of this release. Investors are cautioned that such statements involve risks and uncertainties that could cause actual results to differ materially from historical or anticipated results due to many factors. These factors include, but are not limited to, the following:

• changes in general economic conditions, including prolonged or substantial economic downturn, and any related financial difficulties experienced by original equipment manufacturers, end users, customers, suppliers or others with whom the Company does business;
• changes in customer order patterns;
• changes in our business or our relationship with major technology partners or significant customers;
• failure to maintain adequate levels of inventory;
• production components and service parts cease to be readily available in the marketplace;
• lack of adequate financing to meet working capital needs or to take advantage of business and future growth opportunities that may arise;
• inability of cost reduction initiatives to lead to a realization of savings in labor, facilities or other operational costs;
• deviation of actual results from estimates and/or assumptions used by the Company in the application of its significant accounting policies;
• lack of success in technological advancements;
• inability to retain certifications, authorizations or licenses to provide certain products and/or services;
• risks associated with new business practices, processes and information systems;
• impact of judicial rulings or government regulations, including related compliance costs;
• disruption in the business of suppliers, customers or service providers due to adverse weather, casualty events, technological difficulty, acts of war or terror, or other causes;
• risks associated with doing business internationally, including economic, political and social instability and foreign currency exposure; and
• other factors from time to time described in the Company's filings with the United States Securities and Exchange Commission ("SEC").

The Company undertakes no obligation to publicly update or revise any such statements, except as required by applicable law. For more details, please refer to the Company's SEC filings, including its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.