EXHIBIT 13

[DIGI LOGO]                                                            [GRAPHIC]

[CONNECTWARE LOGO]

To our Stockholders,

Fiscal 2004 was an excellent year for Digi and its stockholders. Last year the
company introduced its "Making Device Networking Easy" vision. We continued to
follow this vision through new innovative product introductions that allow for
ease of integration, as well as improve the level and quality of service we
provide to our customers. This vision, combined with Digi's focus on monitoring
and excelling on key performance indicators in all of our functional areas, has
yielded rewards in terms of financial performance and creating value for
shareholders. The company exceeded its revenue and profitability guidance
throughout the year. Digi achieved $111.2 million in revenue in fiscal 2004, or
an increase of 8 percent over fiscal 2003. Gross profit margin increased to 60.9
percent from 59.6 percent a year ago. Additionally, we continued to reduce our
operating expense (excluding amortization expense)(1) to net sales ratio from
47.7 percent in fiscal 2003 to 45.6 percent in fiscal 2004. This progress,
combined with increased gross margins enabled Digi to improve its operating
income before amortization(1) from 12.4 percent in fiscal 2003 to 15.3 percent
in fiscal 2004.

The company accomplished these strong results by focusing on the following key
objectives throughout fiscal 2004:

- Accelerate revenue and earnings per share growth

- Introduce innovative new products

- Maintain a strong balance sheet

- Make Device Networking Easy

The company made strong progress in all of these areas over the past year.

Accelerated revenue and earnings per share growth was an important goal for the
company in fiscal 2004. Our year-over-year revenue growth rate has accelerated
from the 1.4 percent growth rate posted in fiscal 2003 to 8 percent in fiscal
2004. Our fiscal 2004 earnings per diluted share was $0.39, which represented a
26 percent increase over fiscal 2003 earnings per diluted share of $0.31, before
the cumulative effect of accounting change related to the adoption of SFAS 142.

(1) For this purpose, amortization expense is defined as amortization of
acquisition-related identifiable intangible assets.



In 2004, the company continued to place a high priority on innovative new
products. Early in the year Digi introduced the Inside Out Networks USB Plus
Series of products. This product line is ideal for point-of-sale applications
because it provides device networking while simplifying system architecture by
eliminating the power supply bricks for USB-connected devices. The company also
introduced the Digi CM(TM)Console Server, which extends our line of console
servers with a secure 48-port series of products used for remote device
monitoring in data center environments. Later in the year Digi added Automatic
Device Recognition, which is a unique capability providing the intelligence to
automatically identify equipment attached to the Digi CM remotely. This makes
the process of set-up, configuration and management easier for IT managers.

Digi also made some key additions to its Device Server product family in fiscal
2004. The company introduced two customizable products to the family - the Digi
Connect(TM) EM and the Digi Connect(TM) SP. The Digi Connect SP is a
customizable external box solution for Ethernet enabling an installed base of
devices. The Digi Connect EM is a customizable embedded Device Server module
that has a wide variety of connectivity options that make it ideal for network
and web enabling a device. Digi introduced the Digi Connect Wi-ME(TM) and Digi
Connect Wi-EM(TM), the industry's first fully customizable and secure 32-bit
802.11b embedded modules. These embedded modules allow customers to add wireless
connectivity to their devices quickly and easily.

Finally, Digi introduced the NS9775, an ARM 9-based chip focused on the office
automation vertical segment that provides a breakthrough performance and cost
point for the desktop laser printer and multi-function printer market.

Digi achieved strong cash flow from operations in fiscal 2004 of $19.3 million
versus $15.8 million in fiscal 2003. Additionally, the company continued to
strengthen its balance sheet, ending the year with a cash and marketable
securities balance of $81.7 million, dramatically above the 2003 year end
balance of $57.6 million. The company also eliminated all debt on the balance
sheet in fiscal 2004 to end the year debt free.

Over the past five years we have been executing on a plan to leverage and extend
the Digi brand with next generation commercial grade device networking products
and technologies targeted for certain vertical markets, such as point of sale,
industrial automation, office automation and building controls. Our strategy has
been to extend the value of the Digi brand into these verticals by acquiring or
organically developing growth products. In 2004 we gained significant traction
and momentum in the marketplace with this strategy, increasing our revenue
growth rate in each successive quarter. This has occurred as a result of
innovative products that "Make Device Networking Easy" by providing
differentiated features and functions as well as ease of integration for our
customers. The innovative products coupled with improved execution in the sales
and marketing arena have created the growth momentum in fiscal 2004 that should
continue into fiscal 2005.

In summary, I am proud of the accomplishments of the Digi team in fiscal 2004. A
strong vision that focuses on our key competencies, combined with a continuous
improvement philosophy across all functional areas, has culminated in a very
successful year. I look forward to continuing this strong business model and
further accomplishments from the Digi team in fiscal 2005.

/s/ Joseph T. Dunsmore

Joseph T. Dunsmore
Chairman, President and Chief Executive Officer