SECURITIES AND EXCHANGE COMMISSION
                                 Washington, DC 20549


                                      FORM 10-Q

(Mark One)
__X__          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended SEPTEMBER 30, 1998

                                          OR

_____          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

               For the transition period from ________________to_______________


               COMMISSION FILE NUMBER:   000-25590

 
                    DATASTREAM SYSTEMS, INC.

   Incorporated pursuant to the laws of the State of Delaware
           -------------------------------------------

Internal Revenue Service  -- Employer Identification No. 57-0813674

            50 DATASTREAM PLAZA, GREENVILLE, SC 29605

                         (864) 422-5001
           -------------------------------------------

                         NOT APPLICABLE
   (Former Name, Former Address, if changed since last report)
 

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 ___ 

APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding
of the issuer's common stock as of the latest  practicable  date:  SEPTEMBER 30,
1998 19,143,401 shares, $0.01 par value.


<PAGE>


                                Datastream Systems, Inc.

                                       FORM 10-Q

                            Quarter ended September 30, 1998

                                         Index

                                                                 Page No.

Part I. Consolidated Financial Information
        'Safe Harbor' Statement under the Private Securities
            Litigation Reform Act of 1995                             3

Item 1. Consolidated Financial Statements (unaudited)

        Consolidated Balance Sheet-
          December 31, 1997 and September 30, 1998
           Assets                                                     4
           Liabilities and Owners Equity                              5

        Consolidated Income Statement -
          for the Three Months ended September 30,  1997 and 1998     6

        Consolidated Income Statement -
          for the Nine Months ended September 30, 1997 and 1998       7
 
        Consolidated Statement of Changes in Stockholders Equity -
          for the Nine Months ended September 30, 1998                8

        Consolidated Statement of Cash Flows -
          for the Nine Months ended September 30, 1997 and 1998       9

        Notes to the Consolidated Financial Statements                10

Item 2. Management's Discussion and Analysis of
        Financial Condition and Results of Operations                 13

Item 3. Quantitative and Qualitative Disclosures About                20
        Market Risk


Part II.Other Information                                             21


Signature                                                             22

<PAGE>

PART I.     CONSOLIDATED FINANCIAL INFORMATION



                                   'SAFE HARBOR'
                             STATEMENT UNDER THE PRIVATE
                        SECURITIES LITIGATION REFORM ACT OF 1995

From time to time,  Datastream  Systems,  Inc.  ("Datastream"  or the "Company")
makes  oral  and  written   statements  that  may  constitute   "forward-looking
statements"  (rather than historical facts) as defined in the Private Securities
Litigation  Reform  Act  of  1995  (the  "Act")  or by the  SEC  in  its  rules,
regulations  and releases.  The Company  desires to take  advantage of the "safe
harbor" provisions in the Act for  forward-looking  statements made from time to
time, including, but not limited to, the forward-looking statements made in this
Report on Form 10-Q (the "Report"),  as well as those made in other filings with
the SEC.  Forward-looking  statements  contained  in this  Report  are  based on
management's  current  plans  and  expectations  and are  subject  to risks  and
uncertainties  that could cause actual results to differ  materially  from those
described in the forward-looking  statements. In the preparation of this Report,
where  such  forward-looking  statements  appear,  the  Company  has  sought  to
accompany such  statements  with meaningful  cautionary  statements  identifying
important  factors that could cause  actual  results to differ  materially  from
those described in the forward-looking statements. Such factors include, but are
not  limited  to:  increasing  competition  in the  markets in which the Company
competes; the ability of the Company to enhance its current products and develop
new  products  that  address   technological  and  market  developments;   risks
associated with increasing  international sales, including,  but not limited to,
exposure  to foreign  exchange  fluctuations  and the  ability of the Company to
successfully  compete in foreign markets;  fluctuations in quarterly results due
to  seasonality  and longer  sales cycles in certain  regions  where the Company
markets its  products,  especially in  connection  with the  Company's  high-end
products;  the Company's ability to complete the implementation of its Year 2000
program on a timely basis and the ability of the Company's  suppliers,  vendors,
customers  and other third  parties on which the Company  relies to be Year 2000
ready;  and  changes  in  economic  conditions  generally,   both  domestic  and
international.  The preceding list of risks and uncertainties,  however,  is not
intended  to be  exhaustive,  and  should  be read  in  conjunction  with  other
cautionary  statements  made herein and in the Company's  other  publicly  filed
reports,  including,  but not  limited to, the "Risk  Factors"  set forth in the
Company's  Form 10-K for the fiscal year ended  December 31,  1997.  

The Company does not have,  and expressly  disclaims,  any obligation to release
publicly any updates or any changes in the Company's expectations or any changes
in events, conditions or circumstances on which any forward-looking statement is
based.
<PAGE>
ITEM 1.  Consolidated Financial Statements

                        Datastream Systems, Inc. and Subsidiaries

                               Consolidated Balance Sheets

                                          Assets
 
                                                    December 31,  September 30,
                                                       1997           1998
                                                                   (unaudited)
Current assets:
   Cash and cash equivalents                         $ 2,409,387    $ 3,530,437
   Accounts receivable, net of allowance 
     for doubtful accounts of $1,589,910 
     and $2,395,487, respectively                     21,968,539     31,083,632
   Unbilled receivables                                2,271,375      3,214,487
   Investments                                         9,735,585            160
   Prepaid expenses                                      614,447      2,121,250
   Inventories                                           369,486        385,552
   Deferred income taxes                                 796,000        796,000
   Other assets                                          619,448      1,802,489
                                                     -----------    -----------
       Total current assets                           38,784,267     42,934,007


Investments                                            6,637,286      4,613,486
Property and equipment, net                           10,166,101     13,523,274
Goodwill                                               6,545,747     18,299,343
Capitalized software development costs, 
     net of accumulated amortization of 
     $1,197,177 and $3,617,085, respectively           2,963,842      5,622,722
                                                     -----------    -----------

       Total assets                                  $65,097,243    $84,922,832
                                                     ===========    ===========

See notes to Consolidated Financial Statements

<PAGE>

                        Datastream Systems, Inc. and Subsidiaries

                         Consolidated Balance Sheets (Continued)

                           Liabilities and Stockholders' Equity
 
                                                    December 31,  September 30,
                                                       1997           1998
                                                                   (unaudited)
Current liabilities:
   Accounts payable                                  $ 2,696,240    $ 2,996,544
   Other accrued liabilities                           4,135,258      6,038,869
   Income taxes payable                                2,816,800      5,983,954
   Current portion of long-term debt                     346,197        793,472
   Unearned revenue                                    6,499,953      8,921,358
                                                     -----------    -----------
       Total current liabilities                      16,494,448     24,734,197

Long-term debt, less current portion                     603,098        304,640
Deferred income taxes                                    892,000        892,000
                                                     -----------    -----------
       Total liabilities                              17,989,546     25,930,837

Stockholders' equity:
   Preferred stock, $1 par value, 1,000,000 
     shares authorized; none outstanding                      -              -
   Common stock, $.01 par value, 40,000,000 
     shares authorized; 18,585,518 shares 
     issued and outstanding at December 31, 1997,
     19,143,401 shares issued and outstanding
      at September 30, 1998                              185,855        191,434
   Additional paid-in capital                         58,049,212     65,666,498
   Accumulated deficit                               (11,375,601)    (7,588,338)
   Other accumulated comprehensive income                248,231        722,401
                                                     -----------    ----------- 
       Total stockholders' equity                     47,107,697     58,991,995
                                                     -----------    -----------
       Total liabilities and stockholders' equity    $65,097,243    $84,922,832
                                                     ===========    ===========

See Notes to Consolidated Financial Statements

<PAGE> 
                      Datastream Systems, Inc. and Subsidiaries

                                 Statements of Income
                                      (unaudited)
                     Three months ended September 30, 1997 and 1998

                                                   September 30,  September 30,
                                                       1997           1998

Revenues:
   Product                                           $ 8,194,800    $ 9,401,198
   Professional service                                6,187,778     11,168,981
   Support                                             3,017,597      4,591,265
                                                     -----------    -----------
     Total revenues                                   17,400,175     25,161,444
 
Cost of revenues:
   Cost of product revenues                              745,550      1,044,554
   Cost of professional service revenues               3,738,612      5,971,820
   Cost of support revenues                            1,134,280      1,155,600
                                                     -----------    -----------
     Total cost of revenues                            5,618,442      8,171,974
                                                     -----------    ----------- 
     Gross profit                                     11,781,733     16,989,470
 
Operating expenses:
   Sales and marketing                                 4,604,504      6,325,960
   Product development                                 1,180,355      1,855,410
   General and administrative                          1,522,411      2,220,638
   Write off of in-process research and development
      and other acquisition charges                           -       1,103,967
                                                     -----------    -----------
     Total operating expenses                          7,307,270     11,505,975
                                                     -----------    -----------
     Operating income                                  4,474,463      5,483,495

Other income (expense):
   Interest income                                       198,571        110,142
   Interest expense                                      (48,792)       (28,886)
   Other                                                  99,658        (32,464)
                                                     -----------    -----------
     Net other income                                    249,437         48,792
                                                     -----------    -----------
     Income before income taxes                        4,723,900      5,532,287

Income taxes                                           1,748,000      2,654,547
                                                     -----------    -----------
Net income                                           $ 2,975,900    $ 2,877,740
                                                     ===========    ===========

   Basic net income per share                        $       .16    $       .15
                                                     -----------    -----------
   Diluted net income per share                      $       .15    $       .14
                                                     -----------    -----------
   Basic weighted average number of common and
     potential common shares outstanding              18,451,151     19,072,774
   Diluted weighted average number of common and
     potential common shares outstanding              19,434,160     20,288,891

See Notes to Consolidated Financial Statements

<PAGE>
                       Datastream Systems, Inc. and Subsidiaries

                                  Statements of Income
                                      (unaudited)
                     Nine months ended September 30, 1997 and 1998

                                                   September 30,  September 30,
                                                       1997           1998

Revenues:
   Product                                          $ 21,194,296   $ 26,098,409
   Professional service                               18,878,489     29,956,410
   Support                                             8,823,343     12,677,755
                                                     -----------    -----------
     Total revenues                                   48,896,128     68,732,574

Cost of revenues:
   Cost of product revenues                            2,284,532      2,592,323
   Cost of professional service revenues              10,980,210     15,337,526
   Cost of support revenues                            2,911,807      3,299,930
   Write off of capitalized software costs                    -         597,944
                                                     -----------    -----------
     Total cost of revenues                           16,176,549     21,827,723
                                                     -----------    -----------
      Gross profit                                    32,719,579     46,904,851
 
Operating expenses:
   Sales and marketing                                13,571,866     18,367,015
   Product development                                 3,050,566      5,338,622
   General and administrative                          5,530,108      6,248,581
   Write off of in-process research and development    
      and other acquisition charges                           -       6,585,045
                                                     -----------    -----------
     Total operating expenses                         22,152,540     36,539,263
                                                     -----------    -----------
     Operating income                                 10,567,039     10,365,588

Other income (expense):
   Interest income                                       707,431        462,430
   Interest expense                                     (186,954)       (88,400)
   Other                                                 218,281        131,503
                                                     -----------    -----------
     Net other income                                    738,758        505,533
                                                     -----------    -----------
     Income before income taxes                       11,305,797     10,871,121

Income taxes                                           3,750,812      7,083,858
                                                     -----------    -----------
Net income                                           $ 7,554,985    $ 3,787,263
                                                     ===========    ===========

   Basic net income per share                        $       .41    $       .20
                                                     -----------    -----------
   Diluted net income per share                      $       .40            .19
                                                     -----------    -----------
   Basic weighted average number of common and
     potential common shares outstanding              18,346,436     18,861,271
   Diluted weighted average number of common and
     potential common shares outstanding              18,985,305     20,376,944

See Notes to Consolidated Financial Statements

<PAGE>
<TABLE>

                       Datastream Systems, Inc. and Subsidiaries

               Consolidated Statement of Changes in Stockholders' Equity
                                      (unaudited)


                      For the nine months ended September 30, 1998

<CAPTION>

                                                                          Other
                                             Additional   Accumulated   Accumulated      Total
                                  Common      Paid-In      Earnings    Comprehensive  Stockholders'
                                   Stock      Capital      (Deficit)      Income        Equity
                                   -----      -------      ---------      ------        ------
                                 <C>         <C>          <C>             <C>         <C>

Balance at December 31, 1997     $185,855   $58,049,212  $(11,375,601)   $248,231    $47,107,697

   Net income                          -             -      3,787,263          -       3,787,263

   Stock options exercised          2,575     1,668,649            -           -       1,671,224

   Shares issued for Employee
     Stock Purchase Plan              237       245,909            -           -         246,146

   Shares issued for acquisitions   2,767     5,702,728            -           -       5,705,495

   Other accumulated
     comprehensive income              -             -             -     474,170         474,170
                                 --------      --------      --------   --------     -----------
Balance at September 30, 1998    $191,434   $65,666,498 $ (7,588,338)   $722,401     $58,991,995
                                 ========   ===========  ============   ========     ===========


<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
<PAGE>
                       Datastream Systems, Inc. and Subsidiaries


                                Statements of Cash Flows
                                      (unaudited)

                     Nine months ended September 30, 1997 and 1998

                                                   September 30,  September 30,
                                                       1997           1998

Cash flows from operating activities:
   Net income                                        $ 7,554,985    $ 3,787,263
   Adjustments to reconcile net income to net cash
    provided by operating activities:
     Depreciation                                      1,590,698      2,366,601
     Amortization of capitalized software
      development costs                                  988,544      1,194,009
     Amortization of goodwill                            818,251      1,394,896
     Other accumulated comprehensive income              334,538        469,552
     Loss on disposal of fixed assets                     45,037             -
     Provision for doubtful accounts                          -         312,005
     Write-off of in-process research and development         -       6,585,045
     Write-off of capitalized software costs                  -         597,944
     Changes in operating assets and liabilities:
      Accounts receivable                            (6,748,801)     (9,685,995)
      Accrued interest receivable                       126,340          59,421
      Prepaid expenses                                 (233,374)     (1,666,763)
      Inventories                                        15,565         241,892
      Other assets                                   (1,947,944)     (1,772,712)
      Accounts payable                               (1,124,848)       (241,929)
      Other accrued liabilities                      (4,619,847)     (4,035,634)
      Income taxes payable                              841,397       2,802,704
      Unearned revenue                                1,576,194       2,421,405
                                                      ---------       ---------
      Net cash provided by (used in) 
          operating activities                         (783,265)      4,829,704

Cash flows from investing activities:
   Net proceeds from investments                      1,370,801      12,371,702
   Additions to property and equipment               (3,111,340)     (3,033,720)
   Proceeds from sale of equipment                       58,644              -
   Capitalized software development costs            (1,593,909)     (2,485,647)
   Cash paid for acquisition, net of cash acquired           -      (12,246,291)
                                                     -----------     -----------
      Net cash used in investing activities          (3,275,804)     (5,393,957)

Cash flows from financing activities:
   Proceeds from exercise of stock options            1,755,148       1,671,224
   Proceeds from issuance of shares under employee
      stock purchase plan                                    -          246,145
   Proceeds from line of credit                         400,000              -
   Principal payments on long-term debt              (3,262,128)       (232,066)
                                                     -----------     -----------
      Net cash provided by (used in) 
          financing activities                       (1,106,980)      1,685,303
                                                     -----------     -----------
Net increase (decrease) in 
     cash and cash equivalents                       (5,166,049)      1,121,050
Cash and cash equivalents at beginning of period      6,315,719       2,409,387
                                                     -----------     -----------
Cash and cash equivalents at end of period          $ 1,149,670     $ 3,530,437
                                                    ===========     ===========
See Notes to Consolidated Financial Statement
<PAGE>
 
                      Datastream Systems, Inc. and Subsidiaries

                     Notes to Consolidated Financial Statements


1)  Summary of Significant Accounting Policies

A. Organization and Basis of Presentation

Datastream  Systems,  Inc. (the "Company" or  "Datastream")  develops,  markets,
sells  and  supports  Microsoft  and  Oracle  based  software  products  for the
industrial  automation  market.  These products serve the desktop,  file server,
client-server and enterprise-wide networking environments. Datastream's software
enables users to schedule preventive  maintenance,  record equipment maintenance
histories, organize and control spare parts inventories,  schedule equipment and
parts inventory purchases and deploy maintenance  personnel.  In addition to its
U.S. operations, the Company has direct sales or distribution offices in Canada,
the United Kingdom, The Netherlands,  France, Germany,  Denmark, Sweden, Norway,
Portugal,  Mexico,  Brazil,  Argentina,  Venezuela,  Peru, Malaysia,  Australia,
Singapore, China and South Africa.

On March 31, 1998, the Company acquired Insta Instandhaltung Technischer Anlagen
GmbH, a German  corporation  headquartered  in Munich,  Germany  ("Insta").  The
acquisition has been accounted for using the purchase method. The purchase price
has been  allocated to the  tangible and  intangible  assets  purchased  and the
liabilities assumed based on the fair values on the date of acquisition.

On June 16, 1998, the Company acquired Strategic  Information Systems PTE. Ltd.,
a Singapore  corporation  ("SIS").  The acquisition has been accounted for using
the purchase  method.  The purchase price has been allocated to the tangible and
intangible assets purchased and the liabilities assumed based on the fair values
on the date of acquisition.

On July 13, 1998, the Company  acquired  certain assets of Datastream  (Pacific)
Pty Ltd., an Australian  corporation  ("DSTM-PAC").  The purchase price has been
allocated to the  tangible and  intangible  assets  purchased  based on the fair
values on the date of the acquisition.

On  September  2,  1998,  the  Company  acquired   Computec  Sistemas  S.A.,  an
Argentinean  corporation  ("Computec"),  and  its  affiliate  Computec  Sistemas
Mexicana  S.A.  de  C.V.,  a  Mexican   corporation   ("Computec-Mexico").   The
acquisition has been accounted for using the purchase method. The purchase price
has been  allocated to the  tangible and  intangible  assets  purchased  and the
liabilities assumed based on the fair values on the date of acquisition.

The  interim  financial  information  included  herein  is  unaudited.   Certain
information  and  footnote   disclosures  normally  included  in  the  financial
statements have been condensed or omitted  pursuant to the rules and regulations
of the Securities and Exchange  Commission (SEC),  although the Company believes
that the  disclosures  made are adequate to make the  information  presented not
misleading.   These  consolidated   financial   statements  should  be  read  in
conjunction  with  the  consolidated  financial  statements  and  related  notes
contained in the Company's Form 10-K filed with the SEC on March 31, 1998. Other
than as  indicated  herein,  there  have been no  significant  changes  from the
financial data published in those  reports.  In the opinion of management,  such
unaudited  information  reflects  all  adjustments,  consisting  only of  normal
recurring  accruals and other adjustments as disclosed  herein,  necessary for a
fair presentation of the unaudited information.

Results for interim periods are not necessarily  indicative of results  expected
for the full year.

B.  Accounting Policies

Revenue Recognition

On January 1, 1998, the Company  adopted  Statement of Position 97-2,  "Software
Revenue   Recognition"   ("SOP  97-2").   The  adoption  of  SOP  97-2  did  not
significantly affect the Company's results of operations.
Net Income Per Share

The Company  calculates  earnings  per share in  accordance  with  Statement  of
Financial  Accounting  Standards No. 128, "Earnings Per Share." Basic net income
(loss) per share is  computed  by  dividing  net income  (loss) by the  weighted
average number of common shares outstanding. Diluted net income (loss) per share
is computed by dividing  net income  (loss) by the  weighted  average  number of
common and potential common shares outstanding.  Diluted weighted average common
and potential  common shares  include  common shares and stock options using the
treasury stock method.  The reconciliation of basic and diluted income per share
is as follows:

<PAGE>
For the three months ended September 30, 1998 and 1997:
                                                                      Per Share
                                                  Income    Shares     Amount
    Three months ended September 30, 1998:
       Basic income per share                 $ 2,877,740  19,072,774       .15
       Effect of dilutive securities:
         Stock options                                 -    1,216,117
                                               ----------  ----------      ----
       Diluted income per share               $ 2,877,740  20,288,891       .14
                                              ===========  ==========       ===

    Three months ended September 30, 1997:
       Basic income per share                 $ 2,975,900  18,451,151       .16
       Effect of dilutive securities:
         Stock options                                 -      983,009
                                               ----------  ----------      ----
       Diluted income per share               $ 2,975,900  19,434,160       .15
                                              ===========  ==========       ===

For the nine months ended September 30, 1998 and 1997:
                                                                      Per Share
                                                  Income    Shares     Amount
    Nine months ended September 30, 1998:
       Basic income per share                 $ 3,787,263  18,861,271       .20
       Effect of dilutive securities:
         Stock options                                 -    1,515,673
                                               ----------  ----------      ----
       Diluted income per share               $ 3,787,263  20,376,944       .19
                                              ===========  ==========       ===

    Nine months ended September 30, 1997:
       Basic income per share                 $ 7,554,985  18,346,436       .41
       Effect of dilutive securities:
         Stock options                                 -      638,869
                                               ----------  ----------      ----
       Diluted income per shar                $ 7,554,985  18,985,305       .40
                                              ===========  ==========       ===

On March 31,  1998,  the  Company  issued  130,435  shares  of stock as  partial
consideration  in the Insta  acquisition.  On June 16, 1998,  the Company issued
88,652 shares of stock as partial consideration in the SIS acquisition.  On July
13,  1998,  the  Company  agreed  to issue  13,274  shares  of stock as  partial
consideration  in the DSTM-PAC  acquisition.  On September 2, 1998,  the Company
issued  44,304  shares of stock as partial  consideration  in the  Computec  and
Computec-Mexico acquisition. See "Liquidity and Capital Resources".
Comprehensive Income

On January 1, 1998, the Company adopted Financial  Accounting Standards No. 130,
"Reporting  Comprehensive  Income." As required  by the  Statement,  the Company
displays the accumulated balance of other  comprehensive  income separately from
retained  earnings and additional  paid-in  capital in the equity section of the
Consolidated  Balance Sheets.  Items considered to be other comprehensive income
include  adjustments made for foreign currency  translation (under Statement 52)
and unrealized holding gains and losses on available-for-sale  securities (under
Statement  115).  Comprehensive  income for the periods ended September 30, 1998
and 1997 is as follows: 

September 30,September 30,
    For the three months ended September 30, 1997 and 1998:    
                               
                                                   September 30,  September 30,
                                                       1997           1998

       Net income                                    $ 2,975,900      2,877,740
       Foreign currency translation adjustment            65,365        284,052
                                                     -----------      ---------
       Comprehensive income                          $ 3,041,265      3,161,792
                                                     ===========      =========

    For the nine months ended September 30, 1997 and 1998:

                                                   September 30,  September 30,
                                                       1997           1998
       Net income                                    $ 7,554,985      3,787,263
       Foreign currency translation adjustment           452,149        505,126
       Unrealized loss on securities available-for-sale       -         (30,956)
                                                     -----------      ---------
       Comprehensive income                          $ 8,007,134      4,261,433
                                                     ===========      =========
<PAGE>
C.  Stock Split

Effective  January  30,  1998,  the  Company's  Board of  Directors  declared  a
two-for-one stock split effected in the form of a stock dividend. All share, per
share and  conversion  amounts  relating to the common  stock and stock  options
included in the accompanying financial statements reflect the stock split.

D. Recent Accounting Pronouncements

In June 1998, the FASB issued  Statement of Financial  Accounting  Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities"  ("Statement
No.  133").  Statement  No.  133  requires  that  an  enterprise  recognize  all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position  and measure  those  instruments  at fair value.  Statement  No. 133 is
effective for all fiscal  quarters and all fiscal years beginning after June 15,
1999. The Company is currently assessing the effects of Statement No. 133 on its
financial position.
<PAGE>
ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results
          of Operations

This Report  contains  certain  forward-looking  statements  with respect to the
Company's  operations,   industry,  financial  condition  and  liquidity.  These
statements   reflect  the  Company's   assessment  of  a  number  of  risks  and
uncertainties.  The Company's  actual results could differ  materially  from the
results anticipated in these  forward-looking  statements as a result of certain
factors set forth in this Report.  An additional  statement made pursuant to the
Private Securities  Litigation Reform Act of 1995 and summarizing certain of the
principal risks and uncertainties inherent in the Company's business is included
in Part I of this Report under the caption  'Safe  Harbor'  Statement  Under the
Private  Securities  Litigation  Reform Act of 1995.  Readers of this Report are
encouraged to read such statement carefully.

Overview

The Company offers a complete  family of  "computerized  maintenance  management
systems"  ("CMMS") /  "enterprise  asset  management  software"  ("EAMS") to the
maintenance,  repair and operations  ("MRO") industry.  Generally these products
consists of 5 major categories based on price and functionality.  Maintainit and
Maintainit  Pro are  off-the-shelf,  entry-level  solutions  for small to medium
businesses.  MP2 Professional is a full-featured  integrated  maintenance system
for small to mid-size  companies.  MP2  Enterprise  combines  the benefits of PC
servers  and PC  networks  with a  Windows  graphical  user  interface  and  SQL
relational  database.  MP5 (formally R5 CAMMS) is a high-end  client-server EAMS
product.   Datastream  supports  its  software  products  through   professional
services, including installation,  consulting,  integration,  custom programming
and  training.  Ongoing  technical  support  services are  supplied  pursuant to
renewable annual technical support contracts.

Results of Operations

Total  Revenues.  The Company  reported higher revenues for the third quarter of
1998.  Total revenues  increased 45% to $25,161,444 in the third quarter of 1998
from  $17,400,175 in the third quarter of 1997, due principally to the continued
acceptance of the Company's products in the industrial automation market and the
expansion of the Company's  sales,  professional  service and technical  support
service organizations.  The third quarter of 1998 includes $3,231,038 of revenue
from  the  newly  acquired  entities  of  Insta,  SIS,  DSTM-PAC,  Computec  and
Computec-Mexico.  Total revenues  increased 41% to $68,732,574  during the first
nine months of 1998 from $48,896,128 in the first nine months of 1997.  Revenues
for the first nine months of 1998 includes  $5,084,362 of revenue from the newly
acquired entities of Insta, SIS, DSTM-PAC, Computec and Computec-Mexico.

Product  revenues  increased  15% to $9,401,198  (37% of total  revenues) in the
third  quarter  of 1998 from  $8,194,800  (47% of total  revenues)  in the third
quarter of 1997,  as a result of the growth in new product  sales  including MP2
Enterprise and MP2 Professional - Access, and the growth in international sales.
Product  revenues  increased 23% to $26,098,409  (38% of total  revenues) in the
first nine months of 1998 from  $21,194,296 (43% of total revenues) in the first
nine months of 1997.

Professional  service  revenues  increased  81% to  $11,168,981  (44%  of  total
revenues) in the third quarter of 1998 from  $6,187,778  (36% of total revenues)
in the third  quarter  of 1997.  The  increase  resulted  from the  addition  of
professional  service personnel to service expansion of the Company's  installed
base of systems. Professional service revenues increased 59% to $29,956,410 (44%
of total  revenues)  in the first nine months of 1998 from  $18,878,489  (39% of
total revenues) in the first nine months of 1997.

Technical  support services revenues for the third quarter of 1998 increased 52%
to $4,591,265 (18% of total revenues) from $3,017,597 (17% of total revenues) in
the third  quarter of 1997,  primarily  due to the  expansion  of the  Company's
installed base of systems.  Technical support services revenues increased 44% to
$12,677,755  (18% of total  revenues)  in the  first  nine  months  of 1998 from
$8,823,343 (18% of total revenues) in the first nine months of 1997.

Cost of Revenues.  Cost of revenues  increased 45% to  $8,171,974  (33% of total
revenues) in the third quarter of 1998, as compared to $5,618,442  (32% of total
revenues) in the  comparable  quarter of 1997.  The increase as a percentage  of
total  revenues was due to increase in services  revenue and  increases in staff
needed to meet increased services revenue demand.

Cost of revenues increased 35% to $21,827,723 (32% of total revenues) during the
first nine months of 1998 from  $16,176,549 (33% of total revenues) in the first
nine months of 1997.

Cost of product  revenues was 4% of total revenues in the third quarter of 1998,
and 4% of total revenues during the same period of 1997.

Cost of professional service revenues was 24% of total revenues during the third
quarter of 1998, and 21% of total  revenues  during the same period in 1997. The
increase as a percentage of total revenues was due to increased  staff needed to
meet service revenue demand.
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Cost of technical  support service  revenues was 5% of total revenues during the
third quarter of 1998 and 6% of total  revenues  during the same period in 1997.
The decrease as a percentage of total revenues was due to increased efficiencies
realized in the restructuring of the European support operations during 1997.

Sales and  Marketing  Expenses.  Sales and marketing  expenses  increased 37% to
$6,325,960  (25% of total  revenues)  during  the  third  quarter  of 1998  from
$4,604,504 (26% of total revenues) during the third quarter of 1997, as a result
of an increased  number of sales personnel and  commissions  associated with the
increase in sales revenue,  and increased marketing expenses associated with new
product introductions. Sales and marketing expenses increased 35% to $18,367,015
(27% of total revenues) in the first nine months of 1998 from  $13,571,866  (28%
of total revenues) in the first nine months of 1997.

Product Development Expenses.  Total product development  expenditures increased
37% to $2,646,976 (11% of total revenues)  during the third quarter of 1998 from
$1,932,207  (11% of  total  revenues)  during  the  same  period  in  1997.  The
capitalized  portion of these amounts were $791,566 and $751,852,  respectively.
Giving effect to amounts capitalized,  net product development expense increased
57% to  $1,855,410  (7% of total  revenues)  in the third  quarter  of 1998 from
$1,180,355 (7% of total  revenues)  during the same period in 1997. The increase
in total product  development  expense  resulted from  increasing  the number of
development personnel to support continued development of MP5, integrating newly
acquired products, foreign language development and other new products.

Total product development expenditures increased 68% to $7,824,269 (11% of total
revenues)  during the first  nine  months of 1998 from  $4,644,475  (9% of total
revenues)  during  the same  period in 1997.  The  capitalized  portion of these
amounts were $2,485,647 and $1,593,909,  respectively.  Giving effect to amounts
capitalized,  net product development expense increased 75% to $5,338,622 (8% of
total  revenues) in the first nine months of 1998 from  $3,050,566  (6% of total
revenues) during the same period in 1997.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased 46% to $2,220,638 (9% of total  revenues)  during the third quarter of
1998  from  $1,522,411  (9% of total  revenues)  in the third  quarter  of 1997,
primarily  due  to  increased  salaries.  General  and  administrative  expenses
increased 13% to $6,248,581 (9% of total revenues)  during the first nine months
of 1998 from  $5,530,108  (11% of total  revenues)  in the first nine  months of
1997.

Miscellaneous  Income.  Miscellaneous income decreased to ($32,464) in the third
quarter of 1998 from $99,658 in the third quarter of 1997.  Miscellaneous income
decreased  to  $131,503  in the first nine  months of 1998 from  $218,281 in the
first nine months of 1997. The decrease was due to decreased  rental income from
leasing a  smaller  portion  of the  Company's  building  in  Greenville,  South
Carolina.  A smaller  portion of the  Greenville,  South  Carolina  building was
leased to third parties during 1998 because of the Company's growth and need for
additional space.  Beginning in the third quarter of 1998, the Company no longer
leased any of the building to third parties.

Interest  Income/(Expense).  Interest income  decreased to $110,142 in the third
quarter  of 1998  from  $198,571  in the  third  quarter  of 1997,  due to lower
investment balances realized upon completion of various  acquisitions.  Interest
expense  decreased  to $28,886 in the third  quarter of 1998 from $48,792 in the
third  quarter  of  1997.  The  decrease  in  interest  expense  is due to  debt
repayments  in 1997.  Interest  income  decreased  to $462,430 in the first nine
months of 1998 from $707,431 in the first nine months of 1997.  Interest expense
decreased to $88,400 in the first nine months of 1998 from $186,954 in the first
nine months of 1997.

Tax Rate. The Company's tax rate per the income  statement was 48% for the third
quarter  of  1998  but  due  to   non-deductible   items   associated  with  the
acquisitions,  the  Company's  effective tax rate was 40% as compared to 37% for
the third quarter of 1997.  The Company's tax rate per the income  statement was
65% for the first nine months of 1998 but due to non-deductible items associated
with the acquisitions,  the Company's  effective tax rate was 39% as compared to
33% in the first nine months of 1997.

Net Income. Net income decreased 3% to $2,877,740 (11% of total revenues) in the
third  quarter  of 1998 from  $2,975,900  (17% of total  revenues)  in the third
quarter of 1997. Net income  decreased 50% to $3,787,263 (6% of total  revenues)
in the first nine months of 1998 from  $7,554,985 (15% of total revenues) in the
first nine  months of 1997.  These  decreases  are  directly  attributed  to the
charges for the acquisition of INSTA on March 31, 1998, SIS on June 16,1998, and
Computec  and  Computec-Mexico  on September  2, 1998.  Without the  acquisition
related  charges third quarter net income would have increased 34% to $3,981,707
(16% of total  revenues)  and net income  for the first nine  months of the year
would have increased 45% to $10,970,252 (16% of total revenues).

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Liquidity and Capital Resources

The  Company  has  funded  its  activities  entirely  from cash  generated  from
operations.  The Company ended its third quarter of 1998 with $3,530,437 in cash
and cash  equivalents  defined as securities  maturing in less than 90 days. The
Company intends to re-invest the proceeds of maturing U.S. Government securities
in similar U.S. Government securities.

In July 1997, the Company made a $2 million investment in Distinction  Software,
Inc. ("Distinction") This investment represents less than 20% of the outstanding
equity interests of Distinction.

The  acquisition  of Insta  was  completed  on March  31,  1998 for $7  million,
consisting of $4,375,000 in cash and $2,625,000 (130,435 shares) in common stock
issued pursuant to Regulation S. In connection with the acquisition, the Company
deposited  into escrow  34,783 shares of common  stock,  and assumed  certain of
Insta's outstanding liabilities.

The  acquisition  of SIS was  completed  on June  16,  1998  for  $6.5  million,
consisting of $4,575,000 in cash and $1,925,000  (88,652 shares) in common stock
issued pursuant to Regulation S. In connection with the acquisition, the Company
deposited  into escrow  29,566 shares of common  stock,  and assumed  certain of
SIS's outstanding liabilities.

The acquisition of certain assets of Datastream (Pacific) Pty Ltd. was completed
on July 13, 1998 for  $600,000,  consisting  of  $300,000  in cash and  $300,000
(13,274 shares) in common stock to be issued pursuant to Regulation S.

The acquisition of Computec and its affiliate, Computec-Mexico, was completed on
September  2,  1998 for  $2.6  million,  consisting  of  $1,766,138  in cash and
$834,000  (44,304  shares) in common stock issued  pursuant to  Regulation S. In
connection with the acquisition, the Company deposited into escrow 44,304 shares
of common stock, and assumed certain of Computec's outstanding liabilities.

The Company's principal  commitments as of June 30, 1998, consisted primarily of
long  term  debt  assumed  in the  acquisitions,  and  there  were  no  material
commitments for capital expenditures. The Company believes that its current cash
balances,  availability under its line of credit,  cash flow from operations and
available for sale  investments  will be sufficient to meet its working  capital
and capital expenditure needs for at least the next 12 months.

Year 2000

Many currently  installed  computer  systems and software  products are coded to
accept  only a two-digit  format in the date field.  These date code fields will
need to accept a four-digit  format to distinguish  21st century dates from 20th
century  dates.  As a result,  in less than two years,  computer  systems and/or
software  used by many  companies  may need to be  upgraded  to comply with such
"Year  2000"  requirements.  To address  the Year 2000  issue,  the  Company has
organized a Year 2000  Committee  with the  responsibility  of  determining  the
Company's  Year  2000  readiness,  as well as the Year 2000  readiness  of third
parties on which the  Company  relies,  including  suppliers  and  vendors.  The
Committee includes the Company's directors of development and corporate systems,
product managers,  and representatives from the Company's  financial,  legal and
technical  support areas. The Committee has focused its efforts on both internal
operating  and  information  systems  ("Internal  Systems")  and  the  Company's
products.

The Committee is responsible  for (i)  identifying  and  collecting  data on all
Internal  Systems,  (ii)  determining  which  Internal  Systems need  corrective
action,  (iii)  modifying,  upgrading or replacing  those systems and conducting
follow-up  testing,  and  (iv)  establishing  related  contingency  plans  where
necessary.  The Committee has identified all Internal Systems that may have Year
2000 issues,  has  contacted  the  manufacturers  of those  systems to determine
whether they are Year 2000 ready,  and assessed the cost and timing of achieving
readiness.   Based  on  information  received  from  substantially  all  of  the
manufacturers,  the  Committee  anticipates  that  corrective  actions  for  the
Company's  Internal Systems that are critical to its ongoing  operations will be
completed  and tested by the end of the second  quarter of 1999.  The  Committee
intends to complete  contingency planning for Internal Systems (if any) that may
not be Year 2000 ready during the second and third quarters of 1999. The Company
expects its  contingency  plans to  include,  among  other  things,  manual work
arounds for software and hardware failures,  as well as substitution of systems,
suppliers and/or vendors, if necessary.

The Company  believes  that the current  versions of its  products are Year 2000
compliant. The Company generally defines a product as Year 2000 "compliant" when
that  product  (i) stores and  calculates  dates  consistent  with a  four-digit
format,  (ii)  provides the user a two-digit  short-cut  that is recognized in a
four-digit format, (iii) can correctly execute leap year calculations, (iv) does
not use special values for dates, and (v) correctly processes date specific data
from and after January 1, 2000. The Company  regularly runs regression  tests on
its software,  including  tests of the Year 2000 date  rollover.  Based on these
tests,  the Company does not anticipate  that current  versions of the Company's
products will be adversely  affected by date changes  involving  year 2000.  The
Company has  notified its  customers of the need to migrate to current  products
that management  believes are Year 2000 compliant and has made available to them
<PAGE>
a software  patch that  management  believes will bring these products into Year
2000 compliance.  However, there can be no assurance that the Company's products
contain and will contain all features and functionality  considered necessary by
customers,  distributors,  resellers  and  systems  integrators  to be Year 2000
compliant.  The  Company's  products  increasingly  are  installed  as  part  of
substantial  integrated systems utilized by customers,  which systems may not be
Year 2000 compliant. Also, certain customers of the Company may still be running
earlier versions of the Company's products that are not Year 2000 compliant.  If
the Company is included in any Year 2000 claims by its customers or customers of
systems  integrators,  whether or not such claims  have  merit,  it could have a
material  adverse  effect  on the  Company's  business,  operating  results  and
financial condition.

To date, the Company has incurred  immaterial  expenses associated with its Year
2000 efforts in connection with both Internal Systems and products.  The Company
estimates that total costs associated with corrective actions taken with respect
to its Internal Systems and product upgrades will be immaterial.

Although the Company does not currently believe that it will experience material
disruptions in its business  associated with preparing its Internal  Systems and
products for the year 2000,  there can be no assurance that the Company will not
experience  unanticipated  negative consequences and/or material costs caused by
undetected  errors or defects in the  technology  used in its Internal  Systems,
which are  composed  of third party  software,  and third  party  hardware  that
contain embedded software. Although the Company does not anticipate that it will
experience any disruptions in its supplier or vendor  relationships  due to Year
2000  issues,  it is not  currently  possible  to  predict  whether  failure  of
infrastructure  services  provide by third parties,  such as electricity,  phone
service,  internet services will have a material adverse effect on the Company's
business, operating results and financial condition.

The estimates and conclusions  regarding the Company's Year 2000 program contain
forward  looking  statements  and are based on  management's  best  estimates of
future  events.  Risks to completing  the program  include the  availability  of
resources,  the Company's  ability to discover and correct  potential  Year 2000
problems,  and the ability of certain  third parties to bring their systems into
Year 2000 compliance.

New European Currency

On January 1, 1999, eleven of the fifteen member countries of the European Union
are  scheduled  to establish  fixed  conversion  rates  between  their  existing
currencies and the Euro, a new European currency, and to adopt the Euro as their
common  legal   currency  (the  "Euro   Conversion").   Either  the  Euro  or  a
participating  country's  present currency will be accepted as legal tender from
January 1, 1999 to January 1, 2002,  from which date  forward only the Euro will
be accepted.

The Company has a  significant  number of  customers  located in European  Union
countries participating in the Euro Conversion.  Such customers will likely have
to upgrade or modify  their  computer  systems and  software to comply with Euro
requirements. The amount of money the Company anticipates spending in connection
with product  development related to the Euro Conversion is not expected to have
a material  adverse  effect on the Company's  results of operations or financial
condition.  The Euro Conversion may also have  competitive  implications for the
Company's pricing and marketing  strategies,  which could be material in nature;
however, any such impact is not know at this time.

The Company has also begun to analyze  which of its  internal  systems  (such as
payroll,  accounting and financial  reporting)  will need to be modified to deal
with the Euro Conversion. The Company does not currently expect the cost of such
modifications  to have a material effect on the Company's  results of operations
or  financial  condition.  There is no  assurance,  however,  that all  problems
related  to the Euro  Conversion  will be  foreseen  and  corrected,  or that no
material disruptions of the Company's business will occur.

Other Factors

Competition.  The current  market for  CMMS/EAMS is both  fragmented  and highly
competitive,  and management  expects  competition to intensify as new companies
enter the market and  existing  ones,  including  ERP  companies,  expand  their
product lines.  The Company has entered into the high-end  segment of the market
through both its introduction of an internally developed  client/server  product
line and through its  acquisitions of SQL, Insta,  SIS and Computec.  Management
expects  the  Company  to face  increased  competition  in all  segments  of the
CMMS/EAMS  market and across all  product  lines in the  future.  The  Company's
future performance is partially  dependent upon the Company's ability to respond
to technological changes,  evolving standards and its competitors'  innovations.
Certain competitors, including ERP companies, have greater financial, marketing,
technical,  service and support resources than Datastream.  Also, the Company is
likely to experience a significant  amount of competition in connection with its
continued development and release of Internet- and Web- related products.  There
can be no  assurance  that  the  Company  will be able to  successfully  compete
against  current  and  future  competitors  and  failure  to do so could  have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

<PAGE>
Effects of Technological Change and Risks of Product Development.  The Company's
industry is characterized by rapidly changing  technology,  frequent new product
introductions and evolving industry standards. The Company's future success will
depend upon its ability to enhance  its  current  products  and develop new ones
that address technological and market developments. In particular, an element of
the Company's strategy is to address perceived electronic commerce opportunities
relating to MRO  procurement.  There can be no  assurance  that the Company will
develop   products  that  are  successful  in  capitalizing  on  such  perceived
opportunities.  The Company's product development efforts have required, and are
expected to require,  substantial  investments  by the Company.  There can be no
assurance  that these efforts will be successful or that the resulting  products
will  achieve  market  acceptance.  If the  Company  is  unable to  develop  and
introduce new and enhanced products in a timely manner, or if such products fail
to achieve market acceptance,  the Company's  business,  financial condition and
results  of  operations  would  likely be  materially  and  adversely  affected.
Software  products  may  also  contain  undetected  errors  or bugs  when  first
introduced or as new versions are released,  and software  products or media may
contain  undetected  viruses.  Errors or bugs may also be  present  in  software
licensed by the Company from third parties and  incorporated  into the Company's
products.  Errors,  bugs or  viruses  may  result  in loss of or delay in market
acceptance,  recalls of hardware products  incorporating the software or loss of
data.  Any such defects and errors could result in adverse  customer  reactions,
negative publicity regarding the Company and its products, harm to the Company's
reputation,  loss of or delay in market acceptance,  loss of revenue or required
product  changes,  any of which  could have a material  adverse  effect upon the
Company's business, financial condition and results of operations.

Risks Associated with Acquisitions.  The Company intends in the future to engage
in selective  acquisitions of other businesses or technologies,  including other
providers of CMMS/EAMS software. There can be no assurance that the Company will
be able to  identify  suitable  acquisition  candidates  available  for  sale at
reasonable  prices,  consummate any  acquisition or  successfully  integrate any
acquired  business into the Company's  operations.  The success of any completed
acquisition  will depend in large measure on the Company's  ability to integrate
the operations of the acquired  business with those of the Company and otherwise
to maintain and improve the results of operations of the acquired business.  The
Company has recently completed  acquisitions of Insta, SIS,  DSTM-PAC,  Computec
and Computec-Mexico  and is in the process of integrating those operations.  The
failure to successfully  complete such integration in a timely manner could have
a material  adverse effect on the Company's  business,  financial  condition and
results of  operations.  Further  acquisitions  may  involve a number of special
risks,  including  diversion of  management's  attention,  failure to retain key
acquired personnel, unanticipated events or circumstances, legal liabilities and
amortization of acquired  intangible  assets,  some or all of which could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of  operations.  In addition,  the Company has acquired,  and may in the
future  acquire,   foreign   businesses,   which  entail  additional  risks  and
complications.  Problems with an acquired business could have a material adverse
impact on the  performance  of the Company as a whole.  The Company may elect to
finance any future  acquisitions  with  possible  debt  financing or through the
issuance  or sale of equity  securities  (common  or  preferred  stock),  or any
combination of the foregoing. There can be no assurance that the Company will be
able to arrange adequate  financing on acceptable  terms. If the Company were to
proceed  with  one  or  more  significant  future   acquisitions  in  which  the
consideration  consisted  of  cash,  a  substantial  portion  of  the  Company's
available cash could be used to consummate the acquisitions. If the Company were
to consummate one or more  significant  acquisitions in which the  consideration
consisted of stock,  shareholders  of the Company could suffer dilution of their
interests in the Company.  Most of the businesses  that might become  attractive
acquisition candidates for the Company are likely to have significant intangible
assets,  and  acquisition of these  businesses,  if accounted for as a purchase,
would  typically  result in  substantial  goodwill  amortization  charges to the
Company,  which would reduce future  earnings.  In addition,  such  acquisitions
could involve non-recurring  acquisition-related  charges, such as write-offs or
write-downs of acquired  software  development  costs or other intangible items,
which  could  have a  material  adverse  effect  on  the  Company's  results  of
operations for the quarter in which such charges occur.

Dependence  on  Proprietary  Technology.  The  Company's  success and ability to
compete is dependent in part upon its proprietary technology. The Company relies
on a  combination  of trade  secret,  copyright  and  trademark  laws,  software
licenses,  nondisclosure  agreements  and  technical  measures to establish  and
protect  its  proprietary   technology.   The  Company   generally  enters  into
confidentiality  and/or license agreements with its employees,  distributors and
strategic partners as well as with its customers and potential customers seeking
proprietary information,  and limits access to and distribution of its software,
documentation and other proprietary information.  There can be no assurance that
the  steps  taken  by the  Company  in this  regard  will be  adequate  to deter
misappropriation  or  independent  third-party  development  of its  technology.
Further,  there  can  be  no  assurance  that  third  parties  will  not  assert
infringement or  misappropriation  claims against the Company in the future with
respect to current or future products. Any claims or litigation, with or without
merit,  could be  time-consuming,  result in  costly  litigation,  diversion  of
management's  attention and cause product shipment delays or require the Company
to enter into  royalty or  licensing  arrangements.  Such  royalty or  licensing
arrangements,  if  required,  may not be available  on terms  acceptable  to the
<PAGE>
Company,  if at all, which could have a material adverse effect on the Company's
business, financial condition and results of operations.  Adverse determinations
in such claims or litigation  also could have a material  adverse  effect on the
Company's business, financial condition and results of operations. Litigation to
defend and enforce the Company's  intellectual  property  rights could result in
substantial  costs and diversion of resources and could have a material  adverse
effect on the Company's business, financial condition and results of operations,
regardless of the final outcome of such  litigation.  The Company may be subject
to  additional  risks  as  it  enters  into   transactions  in  countries  where
intellectual property laws are not well developed or are poorly enforced.  Legal
protections of the Company's rights may be ineffective in such countries,  which
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations.

Risks Associated with International Sales.  International sales increased 55% to
35% of the Company's  third quarter 1998 revenues (from 32% in the third quarter
of 1997),  and  management  expects that an increasing  portion of the Company's
total  revenues  will be derived  from  international  operations  conducted  in
foreign  currencies.  Further,  the  Company  intends to  continue to expand its
international  operations  by  increasing  the number of direct sales persons in
existing  markets and additional  international  markets as well as by acquiring
business in international markets.  Accordingly, the Company's business, and its
ability  to expand  its  operations  internationally,  is  subject  to the risks
inherent in international business activities, including, in particular, greater
difficulty in  safeguarding  its  intellectual  property,  general  economic and
political   conditions  in  each  country,   foreign   currency   exchange  rate
fluctuations,  overlap of different tax  structures,  difficulty in staffing and
managing an organization  spread over various  countries,  unexpected changes in
regulatory  requirements,   compliance  with  a  variety  of  foreign  laws  and
regulations, and longer accounts receivable payment cycles in certain countries.
Other risks associated with  international  operations include import and export
licensing  requirements,  trade restrictions and changes in tariff rates. Any of
the  foregoing  factors  could have a material  adverse  effect on the Company's
ability  to expand its  international  operations  which  could  materially  and
adversely  affect the  Company's  business,  financial  condition and results of
operations.  In addition,  the Company must  continue to translate  its software
into  more  foreign  languages.  To the  extent  that the  Company  is unable to
accomplish  such  translations  in a timely  manner,  the  Company's  ability to
further  penetrate   international  markets  would  be  adversely  affected.  In
addition,  the deeper  exposure to  international  markets  opens new areas with
which the Company is not familiar and places the Company in competition with new
vendors.  There is no assurance the Company will be successful in its efforts to
compete in these international markets.

The Company conducts  virtually all its business in US dollars,  Dutch guilders,
French francs,  German marks, British pounds,  Singapore dollars and Argentinean
Pesos.  The Company hedges exchange rate movements on either side of a locked-in
spot rate for movements within a range of 3.1% on the dollar-pound rate and 7.5%
on the dollar-guilder rate. Changes in the value of these currencies relative to
the dollar  beyond the ranges  hedged by the Company  could affect  Datastream's
financial condition and results of operations,  and gains and losses on currency
translations  could  contribute  to  fluctuations  in the  Company's  results of
operations.

Fluctuations in Quarterly  Results.  Traditionally the Company has operated with
very little backlog,  and a significant portion of Datastream's  revenues in any
quarter were the result of a large number of  relatively  small orders  received
during a period.  Accordingly,  the Company was subject to  fluctuations  in the
number of overall  orders in any given period,  which in turn was  influenced by
the overall level of economic and industrial  activity.  The Company establishes
expense  levels  based in part on its  expectations  as to future net  sales.  A
substantial portion of the Company's operating expenses,  particularly personnel
and facilities costs, are relatively fixed in advance of any particular quarter.
As a result,  any  unexpected  decline in revenue is likely to adversely  affect
operating results and net income.  In addition,  the acquisitions of SQL, Insta,
SIS and  Computec  have given the  Company  access to the  market  for  high-end
maintenance  software solutions,  which generally have larger transaction sizes,
take  longer  to  implement  and may  result  in a  longer  sales  process.  The
seasonality of the Company's international operations may result in fluctuations
in quarterly  results.  If the Company's revenues in any given quarter are below
expectations due to any of the aforementioned influences,  results of operations
may be materially  adversely affected,  which in turn could materially adversely
affect the market price of the Company's Common Stock. No assurance can be given
that the  Company  in the future  will be able to  maintain  profitability  on a
quarterly or annual basis.

Need to Establish and Maintain Strategic  Relationships.  A significant business
strategy of the Company is to enter into strategic  marketing alliances or other
similar collaborative relationships. The Company intends to establish technology
and marketing  alliances with leading ERP vendors,  ERP systems  integrators and
MRO  suppliers  to  create  new  distribution  channels  for,  and  enhance  the
capabilities  of, its  products.  Certain of the  Company's  competitors  at the
high-end segment of the market have already  established such alliances with ERP
vendors, which could limit ERP vendors' interests in creating alliances with the
Company.  There can be no  assurance  that the Company will be able to negotiate
such additional strategic relationships, that such additional relationships will
<PAGE>
be available to the Company on acceptable terms or that any such  relationships,
if established,  will be commercially successful.  Failure to do so could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

The  Company is  exploring  opportunities  to  generate  additional  revenues by
directing MRO  procurement  activities of its customer base to a select group of
MRO suppliers via the Internet.  Although management believes such opportunities
are achievable,  these efforts are still in a developmental  phase and while the
Company  established  the strategic  relationships  it believes are necessary to
initiate  such a program,  the software  code logic and business  rules have not
been completed. Consequently, there can be no assurance that the Company will be
able to successfully implement a program of this nature or generate any revenues
from such opportunities.

Dependence on Key  Personnel.  The Company's  continued  success  depends on the
services of several key executive,  sales and marketing and technical employees.
The loss of the  services  of these  personnel,  particularly  those of Larry G.
Blackwell,  the  Company's  founder,   Chairman,  Chief  Executive  Officer  and
President,  or the  Company's  inability to attract and retain  other  qualified
management,  sales and marketing and technical employees,  could have a material
adverse effect on the Company's business and results of operations.  The Company
does not  maintain  any  key-man  life  insurance  policy  with  respect  to Mr.
Blackwell.
 
Competitive  Market for Technical  and Sales  Personnel.  The Company's  success
depends in part on its  ability to attract,  hire,  train,  retain and  motivate
qualified  technical and sales personnel,  with appropriate levels of managerial
and technical capabilities.  The Company's complex technology generally requires
a significant level of expertise to effectively develop and market the Company's
products  and  services  and  to  perform  its  custom  application  development
services.  The Company has at times  experienced,  and continues to  experience,
difficulty in recruiting qualified personnel. The Company believes that the pool
of potential  applicants  with such requisite  expertise is limited.  Recruiting
qualified personnel is an intensely competitive and time- consuming process. The
Company   competes  for  such   personnel   with   companies  in  the  software,
telecommunications  and other  industries,  many of which have greater resources
than the  Company.  Such  competition  has  resulted  in demands  for  increased
compensation from qualified applicants. Due to such competition, the Company has
experienced,  and  expects to  continue to  experience,  turnover  in  technical
personnel.  There can be no  assurance  that the Company will be  successful  in
attracting  and  retaining  the  technical  personnel it requires to conduct and
expand its operations successfully.  The Company's business, financial condition
and results of operations could be materially  adversely affected if the Company
were unable to attract, hire, train, retain and motivate qualified technical and
sales personnel.

Stock Price Volatility. The market price of the Company's Common Stock has risen
substantially  since the Company's  initial  public  offering in April 1995. The
Common Stock is quoted on the Nasdaq National Market,  which has experienced and
is likely to experience in the future significant price and volume fluctuations,
which could adversely affect the market price of the Common Stock without regard
to the operating  performance of the Company.  In addition,  management believes
that factors  such as quarterly  fluctuations  in the  financial  results of the
Company,  the overall  economy and the condition of the financial  markets could
cause the price of the Common Stock to fluctuate substantially.


<PAGE>

ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk


Pursuant  to the  general  instructions  to  Item  305 of  SEC  Regulation  S-K,
quantitative and qualitative  disclosures  called for by this Item 3 and by Item
305 of SEC Regulation S-K are inapplicable to the Company at this time.

<PAGE>

PART II.     OTHER INFORMATION

Item 1.  Legal Proceedings
 
         Not Applicable

Item 2.  Changes in Securities
 
         Not Applicable

Item 3.  Defaults Upon Senior Securities

         Not Applicable

Item 4.  Submission of Matters to a Vote of Stockholders

         Not Applicable

Item 5.       Other Information

         Not Applicable

Item 6.       Exhibits and Reports on Form 8-K

            (a)    Exhibits

         27   Financial Data Schedule

(b)  Reports on Form 8-K

              The Company filed a Current Report on Form 8-K on July 23, 1998 to
              report the Company's acquisition of certain assets of Datastream
              (Pacific) PTY Ltd. on July 13, 1998.

              The Company filed a Current Report on Form 8-K on September 16,
              1998 to report the Company's acquisition of Computec Sistemas S.A.
              and  its affiliate Computec Mexicana S.A. de C.V. on September 2,
              1998.


<PAGE>
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.


                           Datastream Systems, Inc.


                           /s/ Daniel H. Christie
Date:   11/06/98                ______________________
                           Daniel H. Christie
                           Chief Financial Officer (principal
                            financial and accounting officer)

<PAGE>
                                     EXHIBIT INDEX



Exhibit Number                  Description

27                     Financial Data Schedule



<PAGE>