FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, DC  20549


                  Quarterly Report Under Section 13 Or 15(d)
                    Of The Securities Exchange Act Of 1934



For the Quarter Ended:   October 3, 1998           Commission File No:   0-6933



                              CAMBEX CORPORATION

            (Exact name of registrant as specified in its charter)



       Massachusetts                             04-244-2959

       (State or other jurisdiction of           (I.R.S. Employer
       incorporation or organization)            Identification No.)


                  360 Second Avenue, Waltham, Massachusetts

                   (Address of principal executive offices)


                                    02451

                                  (Zip Code)


Registrant's telephone number, including area code:  (781) 890-6000


       Indicate by check mark whether the registrant (1) has filed all reports 
       required to be filed by Section 13 or 15(d) of the Securities Exchange 
       Act of 1934 during the preceding 12 months (or for such shorter period 
       that the registrant was required to file such reports) and (2) has been 
       subject to such filing requirements for the past 90 days.

             Yes  X                              No

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                                             CAMBEX CORPORATION AND SUBSIDIARIES
      
                                                 CONSOLIDATED BALANCE SHEETS
                                              OCTOBER 3, 1998 AND DECEMBER 31, 1997
                                                           (UNAUDITED) 
      
                                                            ASSETS
      
      
                                                                            OCTOBER 3,              DECEMBER 31,
                                                                              1998                      1997
                                                                          -------------             -------------
      CURRENT ASSETS:
      
         CASH AND CASH EQUIVALENTS                                       $     153,669             $     476,246
      
      
         ACCOUNTS RECEIVABLE, LESS RESERVES OF
           $100,000 ON OCTOBER 3, 1998 AND
           $131,000 ON DECEMBER 31, 1997                                       247,961                 1,200,343
      
         CURRENT PORTION OF INVESTMENT IN SALES-TYPE LEASES,
           NET OF UNEARNED INTEREST INCOME OF $1,000 ON
           OCTOBER 3, 1998 AND $4,000 ON DECEMBER 31, 1997                      40,993                    59,299
      
         INVENTORIES                                                           570,764                 1,412,925
      
         PREPAID TAXES                                                          -                         -
      
         PREPAID EXPENSES                                                      119,182                   121,183
                                                                         --------------            --------------
            TOTAL CURRENT ASSETS                                         $   1,132,569             $   3,269,996
                                                                         --------------            --------------
      LONG-TERM INVESTMENT IN SALES-TYPE LEASES, NET
         OF UNEARNED INTEREST INCOME OF $1,000 ON
         ON DECEMBER 31, 1997                                            $      -                  $      25,820
      
      LEASED EQUIPMENT, AT COST, NET OF ACCUMULATED
         DEPRECIATION OF $220,000 ON OCTOBER 3, 1998                         
         AND $183,000 ON DECEMBER 31, 1997                               $      -                  $      37,886
      
      PROPERTY AND EQUIPMENT, AT COST:
      
         MACHINERY AND EQUIPMENT                                         $   3,044,199             $   3,036,699
         FURNITURE AND FIXTURES                                                247,173                   247,173
         LEASEHOLD IMPROVEMENTS                                                602,092                   620,949
                                                                         --------------            --------------
                                                                         $   3,893,464             $   3,904,821
      
         LESS - ACCUMULATED DEPRECIATION AND AMORTIZATION                    3,517,215                 3,347,941
                                                                         --------------            --------------
            NET PROPERTY AND EQUIPMENT                                   $     376,249             $     556,880
      
      OTHER ASSETS
            TECHNOLOGY LICENSE/MARKETING AGREEMENT, 
              NET OF ACCUMULATED AMORTIZATION OF $8,500,000
              ON OCTOBER 3, 1998 AND ON DECEMBER 31, 1997                   $      -                  $      -
            OTHER                                                               37,830                    37,830
                                                                         --------------            --------------
        TOTAL ASSETS                                                     $   1,546,648             $   3,928,412
                                                                         ==============            ==============
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                                           CONSOLIDATED BALANCE SHEETS
                                       OCTOBER 3, 1998 AND DECEMBER 31, 1997
                                                   (UNAUDITED)
      
                                     LIABILITIES AND STOCKHOLDERS' INVESTMENT
      
                                                                              OCTOBER 3,          DECEMBER 31,
                                                                                 1998                  1997
                                                                            -------------         --------------
      LIABILITIES NOT SUBJECT TO COMPROMISE:
      CURRENT LIABILITIES:
      
        ACCOUNTS PAYABLE                                                    $    238,328          $     296,419      
        OBLIGATIONS FOR TRADE-IN MEMORY                                             -                      -      
        ACCRUED EXPENSES                                                         355,629                461,725
                                                                            -------------         --------------
           TOTAL CURRENT LIABILITIES                                        $    593,957          $     758,144
                                                                            -------------         --------------
      
      NOTES PAYABLE                                                         $  1,063,730                   -

      DEFERRED REVENUE                                                            15,478                 15,478

      LIABILITIES SUBJECT TO COMPROMISE:
        ACCOUNTS PAYABLE AND ACCRUED EXPENSES                               $  5,415,549          $   6,325,273
      
      STOCKHOLDERS' INVESTMENT: 
      
        PREFERRED STOCK, $1.00 PAR VALUE PER SHARE
          AUTHORIZED - 3,000,000 SHARES
          ISSUED - NONE                                                               --                     --
      
        COMMON STOCK, $.10 PAR VALUE PER SHARE -
           AUTHORIZED -   25,000,000 SHARES
           ISSUED  -  10,947,784 SHARES ON OCTOBER 3, 1998 AND
                      10,636,108 SHARES ON DECEMBER 31, 1997                $  1,094,778          $   1,063,611
                                                                              
        CAPITAL IN EXCESS OF PAR VALUE                                        15,916,707             15,814,783
      
        CUMULATIVE TRANSLATION ADJUSTMENT                                        123,987                 60,756
      
        RETAINED EARNINGS (DEFICIT)                                          (21,822,772)           (19,254,867)
      
        LESS - COST OF SHARES HELD IN TREASURY -  
               1,534,356 ON OCTOBER 3, 1998 AND
               ON DECEMBER 31, 1997                                             (854,766)              (854,766)
                                                                            -------------         --------------
        TOTAL STOCKHOLDERS' INVESTMENT                                      $ (5,542,066)         $  (3,170,483)
                                                                            -------------         --------------
        TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT                      $  1,546,648          $   3,928,412
                                                                            =============         ==============
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                                      CAMBEX CORPORATION AND SUBSIDIARIES
  
                                       CONSOLIDATED STATEMENTS OF INCOME
                                  FOR THE NINE MONTHS ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
                                                      (UNAUDITED)
                                              
                                                      QUARTER ENDED                 NINE MONTHS ENDED           
  
                                             OCTOBER 3,          SEPTEMBER 27,    OCTOBER 3,    SEPTEMBER 27,         
                                                 1998                 1997         1998            1997
                                            ------------         ------------    -----------     ----------    
 
  REVENUES                                  $   739,609         $  1,225,125    $  2,578,744    $  8,627,760
  
  COST OF SALES                                 726,469            1,095,324       2,346,726       5,793,832 

            
                                           -------------        -------------   ------------    ------------
  GROSS PROFIT                              $    13,140         $    129,801    $    232,018    $  2,833,928  
  
  OPERATING EXPENSES:
                                                                  
    RESEARCH AND DEVELOPMENT                $   451,362         $    555,043    $  1,116,704    $  2,067,447
    SELLING                                     251,130              705,902         812,632       2,912,404
    GENERAL AND ADMINISTRATIVE                  182,415              357,672         603,030       1,070,165
                                            ------------        -------------   ------------    ------------
                                            $   884,907         $  1,618,617    $  2,532,366    $  6,050,016       
                                            ------------        -------------   ------------    ------------        
  
  OPERATING INCOME (LOSS)                   $(  871,767)        $ (1,488,816)   $ (2,300,348)   $ (3,216,088)
  
  OTHER INCOME (EXPENSE):
    INTEREST EXPENSE                        $(   35,000)        $ (   30,999)   $ (   35,000)   $ (   74,453)
    INTEREST INCOME                                 797                2,368           3,079          21,686               
    OTHER INCOME (EXPENSE)                      (34,999)          (  166,886)     (  235,636)     (  210,796)          
                                            ------------        -------------   ------------    ------------         
   INCOME (LOSS) BEFORE INCOME TAXES        $(  940,969)        $ (1,684,333)   $ (2,567,905)   $ (3,479,651)

    PROVISION FOR INCOME TAXES              $         0         $          0               0               0
                                            ------------        -------------   ------------    ------------
  NET INCOME (LOSS)                         $(  940,969)        $ (1,684,333)   $ (2,567,905)   $ (3,479,651)
                                            ============        =============   ============    ============ 
  
  NET INCOME (LOSS) PER COMMON SHARE        $    (0.10)         $      (0.18)   $      (0.28)   $      (0.38)   
                                            ============        =============   =============   ============   
  WEIGHTED AVERAGE COMMON AND COMMON                              
  EQUIVALENT SHARES OUTSTANDING               9,375,000            9,090,000       9,250,000       9,090,000    
  
 
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                                           CAMBEX CORPORATION AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 FOR THE NINE MONTHS ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
  
                                                                                 FOR THE NINE MONTHS ENDED
                                                                               OCTOBER 3,      SEPTEMBER 27,
                                                                                    1998             1997
                                                                               ----------       ----------
  CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income (Loss)                                                            $ (2,567,905)    $ (3,479,651)
  Adjustments to reconcile net income to net
    cash provided by (used in) operating activities:
    Depreciation and amortization                                              $    215,017     $    587,258
    Amortization of prepaid expenses                                                 24,892           28,990
    Common stock issued in lieu of cash                                             125,907             -
    Change in assets and liabilities:
      Decrease in accounts receivable                                               952,382          356,412    
      Decrease in inventory                                                         842,161        1,620,495
      Decrease in investment in sales-type leases                                    44,126          486,815
      Decrease in prepaid taxes                                                        -           2,335,295
      Decrease (increase) in prepaid expenses                                       (22,891)          33,653 
      Decrease in other assets                                                         -                -
      Increase (decrease) in accounts payable                                      ( 58,091)         341,175
      Decrease in obligations for trade-in memory                                      -            ( 21,985)
      Increase (decrease) in accrued liabilities                                   (106,096)        (608,808)
      Increase (decrease) in deferred revenue                                          -            (467,399) 
      Increase (decrease) in liabilities subject to compromise                     (909,724)            - 
                                                                                 
                                                                               -------------     ------------
        Total adjustments                                                      $  1,107,683     $  4,691,901
                                                                               -------------     ------------
        Net cash provided by (used in) operating activities                    $ (1,460,222)    $  1,212,250
  
  CASH FLOWS FROM INVESTING ACTIVITIES:
    Sales (purchases) of Equipment                                             $      3,500     $    (13,339)
                                                                                ------------     ------------
        Net cash provided by (used in) investing activities                    $      3,500     $    (13,339)
  
  CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from sale of common stock                                         $     7,184     $      24,875
    Proceeds from notes payable                                                   1,063,730             -
    Repayments under revolving credit agreement                                        -          (1,800,000)
                                                                               -------------     ------------
      Net cash provided by (used in) financing activities                      $  1,070,914     $ (1,775,125)
  
    Effect of exchange rate changes on cash                                          63,231           63,464
                                                                                ------------     ------------
  Net decrease in cash and cash equivalents                                    $   (322,577)    $   (512,750)
  
  Cash and cash equivalents at beginning of period                             $    476,246     $    615,949
                                                                               -------------     ------------
  Cash and cash equivalents at end of period                                   $    153,669     $    103,199
                                                                               =============     ============
  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the period for:
      Interest                                                                 $       -        $     43,454
      Income Taxes                                                                     -                -
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<PAGE>
                                  FORM 10-Q

                     CAMBEX CORPORATION AND SUBSIDIARIES


For The Quarter Ended: October 3, 1998           Commission File No:   0-6933

Notes & Comments:

       (1)Significant Accounting Policies

       The accompanying consolidated financial statements include the accounts 
       of the Company and its wholly-owned subsidiaries.  All material 
       intercompany transactions and balances have been eliminated in 
       consolidation.

       The Company has deferred revenue associated with the sale of certain 
       products which have future performance obligations, relating 
       to reinstallation of IBM memory and maintenance.

       The condensed financial statements included herein have been prepared by 
       the Company, without audit, pursuant to the rules and regulations of the 
       Securities and Exchange Commission.  Certain information and footnote 
       disclosures normally included in financial statements prepared in 
       accordance with generally accepted accounting principles have been 
       condensed or omitted pursuant to such rules and regulations, although 
       the Company believes that the disclosures are adequate to make the 
       information presented not misleading.  The information furnished 
       includes all adjustments and accruals consisting only of normal 
       recurring accrual adjustments which are, in the opinion of management, 
       necessary for a fair presentation of results for the interim period.  It 
       is suggested that these condensed financial statements be read in 
       conjunction with the financial statements and the notes thereto included 
       in the Company's latest annual report on Form 10-K.

       Inventories, which include raw materials, labor and manufacturing 
       overhead are stated at the lower of cost (first-in, first-out) or market 
       and consist of the following:

                                  October 3,             December 31, 
                                     1998                    1997       
 
       Raw materials              $  399,080            $   987,920
       Work-in-process               103,162                255,377
       Finished goods                 68,522                169,628
       Trade-in memory                 -                       -

                                  $  570,764            $ 1,412,925


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                                  FORM 10-Q

                     CAMBEX CORPORATION AND SUBSIDIARIES


For The Quarter Ended:  October 3, 1998               Commission File:  0-6933



Notes & Comments (Continued):


       (2)    Income and Dividends Per Share

              Per share amounts are based on the weighted average number of 
              shares outstanding during each year plus applicable common stock 
              equivalents.  There were no material differences for per share 
              amounts assuming full dilution in either year.

       (3)    Management's Discussion and Analysis of Financial Condition and 
              Results of Operations

              Revenues for the third quarter ended October 3, 1998 decreased
              40% from the comparable three months of the prior year due 
              to decreased sales of the Company's mainframe storage and 
              client/server storage products. 

              For the third quarter of 1998, the gross profit of 2% was lower 
              than the gross profit of 11% in 1997 due primarily to the 
              relative amount of fixed costs in relation to lower revenues.

              Operating expenses for the three months ended October 3, 1998 
              decreased 45% from the comparable three months of the prior year 
              due to the cost savings achieved from putting in place
              additional expense controls.
               



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                                  FORM 10-Q

                     CAMBEX CORPORATION AND SUBSIDIARIES


For The Quarter Ended:   October 3, 1998           Commission File:      0-6933





                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.


CAMBEX CORPORATION


By:    /s/    Joseph F. Kruy
       
              Joseph F. Kruy
              President




By:    /s/    Peter J. Kruy
                    
              Peter J. Kruy
              Chief Financial Officer




Dated:        November 16, 1998










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