<SEC-DOCUMENT>0001193125-15-098726.txt : 20150501
<SEC-HEADER>0001193125-15-098726.hdr.sgml : 20150501
<ACCEPTANCE-DATETIME>20150319171459
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ACCESSION NUMBER:		0001193125-15-098726
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20150319

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DIGI INTERNATIONAL INC
		CENTRAL INDEX KEY:			0000854775
		STANDARD INDUSTRIAL CLASSIFICATION:	COMPUTER COMMUNICATIONS EQUIPMENT [3576]
		IRS NUMBER:				411532464
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		11001 BREN ROAD EAST
		CITY:			MINNETONKA
		STATE:			MN
		ZIP:			55343
		BUSINESS PHONE:		(952) 912-3444

	MAIL ADDRESS:	
		STREET 1:		11001 BREN ROAD EAST
		CITY:			MINNETONKA
		STATE:			MN
		ZIP:			55343
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">March&nbsp;19, 2015 </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">U.S. Securities and Exchange Commission</P></TD>
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<TD VALIGN="bottom" ALIGN="right"><B><U>By EDGAR</U></B></TD></TR>
</TABLE> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Division of Corporation Finance </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">100 F. Street, N.E. </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Washington, D.C. 20549-7010 </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="5%" VALIGN="top" ALIGN="left">Attn:</TD>
<TD ALIGN="left" VALIGN="top">Patrick Gilmore </TD></TR></TABLE> <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:5%; font-size:10pt; font-family:Times New Roman">Accounting Branch Chief </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left">Re:</TD>
<TD ALIGN="left" VALIGN="top"><B>Digi International Inc.</B> </TD></TR></TABLE> <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><B>Form 10-K for the Fiscal Year Ended September&nbsp;30, 2014
</B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><B>Filed December&nbsp;11, 2014 </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><B>File No.&nbsp;001-34033 </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Ladies and
Gentlemen: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Digi International Inc. (the &#147;Company&#148;) is responding to the letter dated March&nbsp;9, 2015, of Patrick Gilmore of the Division of
Corporation Finance to Steven E. Snyder, Senior Vice President, Chief Financial Officer and Treasurer of the Company, with respect to comments on the above-referenced filing. For ease of reference, this letter is formatted to include the
staff&#146;s comments, followed by the Company&#146;s response. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The terms &#147;Digi,&#148; &#147;we,&#148; &#147;our,&#148; or &#147;us&#148; mean Digi
International Inc. and all of the subsidiaries included in the consolidated financial statements unless the context indicates otherwise. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Form 10-K for
the Fiscal Year Ended September&nbsp;30, 2014</U> </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>General</U> </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><I></I>1.</TD>
<TD ALIGN="left" VALIGN="top"><I>Your website includes information stating that exports to Cuba, Sudan and Syria require a license, and that Digi products may not be exported to Cuba, Sudan or Syria without proper authorization from the U.S.
government. In addition, Environmental Expert&#146;s website provides a list of wireless monitoring networks companies in Syria, and the list includes your company, your logo, a description of your business and a link to your website. Syria, Sudan
and Cuba are designated by the State Department as state sponsors of terrorism, and are subject to U.S. economic sanctions and export controls. This Form 10-K does not include information about those countries. Please describe to us the nature and
extent of your past, current, and anticipated contacts with Syria, Sudan and Cuba since your letter to us dated March&nbsp;9, 2010, whether through subsidiaries, affiliates, distributors, resellers, customers or other direct or indirect
arrangements. </I></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><I>In this respect, we note from this Form 10-K that Ericsson is an alliance partner. In 2014, Ericsson
told us in publicly filed correspondence that it has operations associated with Syria, Sudan and Cuba involving the sale of telecommunications infrastructure related products and services, and that it has an office in Syria. You should describe any
products or services you have provided to Syria, Sudan and Cuba, directly or indirectly, and any agreements, commercial arrangements, or other contacts with the governments of those countries or entities they control. </I></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Response: </U></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Digi has no direct past, current, or
anticipated contacts with the embargoed countries of Syria, Sudan or Cuba, nor is any employee, agent, or representative authorized to make such contacts. Our distributor contracts require compliance with U.S. export controls, which prohibit
activity with these countries. We have an export compliance program designed specifically to identify and prevent any agreements or transactions between Digi and any of these countries and their known affiliates and agents as identified by the U.S.
government. Digi personnel receive training designed to ensure that they are familiar with the requirements and prohibitions of our export compliance program and applicable U.S. export controls. In accordance with our export compliance
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Securities and Exchange Commission </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">March 19, 2015 </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Page 2 </P>
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program, sales orders are reviewed using a software program and matched to a denied parties list. All employees are instructed that, in the event of an inquiry from one of the embargoed
countries, we will indicate that we are prohibited from entering into any such transaction. We have not provided any products or services to Syria, Sudan or Cuba directly, nor, to our knowledge, indirectly. We have not entered into agreements,
commercial arrangements, or other contacts with the governments of those countries, nor, to our knowledge, any entities they control. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">With regard to the
Environmental Experts website, the query results that list the Company when a user searches for &#147;wireless monitoring networks&#148; and filtering the results to &#147;distributors&#148; in &#147;Syria&#148; are incorrect with respect to the
Company. For example, other, broader searches for all companies operating in Syria do not list Digi or any of its subsidiaries or affiliates and the detailed profile of Digi provided on the Environmental Experts website does not contain any
annotations that suggest that it has contacts with Syria. Each of those examples is appropriate because we do not operate there. We intend to coordinate efforts with the administrators of the Environmental Experts website and ask them to resolve the
error in their query system. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">With regard to your reference to Ericsson, they are a multi-national company that conducts business with hundreds, if not
thousands, of other companies around the world. We cannot speak to their dealings or operations in Syria, Sudan or Cuba. We are not party to any agreements with Ericsson that pertain to any of these jurisdictions. We have no records that indicate
any of their entities in Syria, Sudan or Cuba have purchased our products either directly from us or from any of our distributors. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><I></I>2.</TD>
<TD ALIGN="left" VALIGN="top"><I>Please discuss the materiality of any contacts with Syria, Sudan and Cuba you describe in response to the comment above, and whether those contacts constitute a material investment risk for your security holders. You
should address materiality in quantitative terms, including the approximate dollar amounts of any revenues, assets and liabilities associated with Cuba, Iran, Sudan and Syria since the referenced letter. Also, address materiality in terms of
qualitative factors that a reasonable investor would deem important in making an investment decision, including the potential impact of corporate activities upon a company&#146;s reputation and share value. As you know, various state and municipal
governments, universities, and other investors have proposed or adopted divestment or similar initiatives regarding investment in companies that do business with U.S.-designated state sponsors of terrorism. You should address the potential impact of
the investor sentiment evidenced by such actions directed toward companies that have operations associated with Syria, Sudan and Cuba. </I></TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Response: </U></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We have no direct and no known indirect
contacts with Syria, Sudan, Cuba or Iran. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><I></I>3.</TD>
<TD ALIGN="left" VALIGN="top"><I>We note information on your website stating that some of your products are controlled under the U.S. Export Administration Regulations. Please tell us whether any contacts with Syria, Sudan or Cuba involve products
or technology that are dual use or otherwise are controlled under the EAR. </I></TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Response: </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We have no direct and no known indirect contacts with Syria, Sudan or Cuba. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Securities and Exchange Commission </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">March 19, 2015 </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Page 3 </P>
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<TD WIDTH="10%" VALIGN="top" ALIGN="left"><B></B><U>Item&nbsp;9A.</U></TD>
<TD ALIGN="left" VALIGN="top"><U>Controls and Procedures</U><B> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Management&#146;s Report on Internal Control Over Financial
Reporting, page 68</U> </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><I></I>4.</TD>
<TD ALIGN="left" VALIGN="top"><I>You state that you did not maintain effective controls over the preparation, review and analysis of income tax balances. However, you do not disclose your conclusion on the effectiveness of your internal control over
financial reporting as of September&nbsp;30, 2014. Please amend and revise your disclosures to include this conclusion, consistent with Item&nbsp;308(a)(3) of Regulation S-K. </I></TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Response: </U></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We believe that the disclosures
regarding Digi&#146;s internal control over financial reporting appearing in Part I, Item&nbsp;1A on page 14 of the Form 10-K and Part II, Item&nbsp;9A of the Form 10-K for the fiscal year ended September&nbsp;30, 2014 (the &#147;Report&#148;),
including the reference to the adverse auditors&#146; opinion for the applicable period communicates our conclusion. However, we have filed concurrently with the submission of this letter an Amendment No.&nbsp;1 to the Report that restates Part II,
Item&nbsp;9A in its entirety with the following additional sentence inserted under the heading &#147;Management&#146;s Report on Internal Control Over Financial Reporting:&#148; </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">&#147;Because of this material weakness, management concluded that the Company did not maintain effective internal control over financial
reporting as of September&nbsp;30, 2014, based on criteria in <I>Internal Control &#150; Integrated Framework</I> issued by the COSO.&#148; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">As
specifically requested by the Commission, we acknowledge that: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the Company is responsible for the adequacy and accuracy of the disclosure in the filing; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Please feel free to contact the undersigned at 952-912-3444 if the Commission staff has any questions or concerns regarding the matters discussed in this
letter. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
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<TD VALIGN="top" COLSPAN="3">Very truly yours,</TD></TR>
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<TD VALIGN="top" COLSPAN="3"><B>DIGI INTERNATIONAL INC.</B></TD></TR>
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<TD VALIGN="top">By:&nbsp;</TD>
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<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">/s/ Steven E. Snyder</P></TD></TR>
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<TD VALIGN="bottom">Steven E. Snyder</TD></TR>
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<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Senior&nbsp;Vice&nbsp;President,&nbsp;Chief&nbsp;Financial&nbsp;Officer&nbsp;and</P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman">Treasurer</P></TD></TR>
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<TD WIDTH="5%" VALIGN="top" ALIGN="left">cc:</TD>
<TD ALIGN="left" VALIGN="top">Digi International Inc. Audit Committee </TD></TR></TABLE> <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:5%; font-size:10pt; font-family:Times New Roman">Ronald E. Konezny, President and Chief Executive
Officer </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:5%; font-size:10pt; font-family:Times New Roman">David H. Sampsell, Vice President, General Counsel and Corporate Secretary </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:5%; font-size:10pt; font-family:Times New Roman">Melissa Kindelan, SEC Staff Accountant </P>
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