PDSi Introduces Plan for Operational Improvements

Pinnacle Data Systems, Inc. (PDSi) (AMEX: PNS) today announced an operational improvement plan to upgrade its headquarters facility in Groveport, Ohio, open a warehouse and logistics facility in Groveport, and consolidate its domestic production operations in these facilities.

PDSi will invest approximately $400,000 in 2006 to increase and improve its production, warehouse and logistics capabilities in Ohio. Most of the $400,000 investment will be capitalized. As part of this consolidation, PDSi has entered into a multi-year lease for an additional 26,000 square feet of warehouse space approximately two miles from its current facility with an option to expand the new facility to 50,000 square feet as needed. The anticipated increase in employees at these facilities may benefit from state and local government incentives support.

As a result of the 2005 acquisition, PDSi currently has duplicate production capabilities in its Ohio and California facilities. Leveraging the Ohio facilities for all domestic production is expected to result in a net reduction of ten associates by the third quarter of 2006 and significantly reduce the Company’s fixed costs within the next year. Additional expenses to complete the consolidation are expected to total approximately $1.6 million, with annual cost savings expected to be in excess of $1.6 million once the California facility is subleased. The Company plans to sublease the California facility within the next twelve months.

“The significant improvements to our current facility and the addition of the warehouse and logistics facility are part of the Company’s Fulcrum initiative. Our Ohio facilities will be PDSi’s operational models and set the standard for international partner qualification,” commented Michael R. Sayre, President and CEO of PDSi.

Sayre continued, “By all measures our August 2005 acquisition has been a success. However, the cost of our production space in California is about four times the cost of similar space in Ohio and is not a strategic requirement of our business. We will continue to provide sales, engineering and customer support out of the Los Angeles area long-term.”

About PDSi
PDSi provides professional services around the development, deployment and support of sophisticated computer systems that are, or are in, the products of its world-leading original equipment manufacturer customer base in the computer and network, imaging, medical, telecommunications, and aerospace equipment industries, among others. PDSi offers a full range of engineering, product development, project and program management, integration, manufacturing, and lifecycle support services designed to increase product speed to market and engineered product life while decreasing overall costs to develop, deploy and service their products.