UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

     [X]  QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
EXCHANGE ACT OF 1934

     For the quarterly period ended February 28, 1999

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

For the transition period from                     to

     Commission File No.: 0-25592

                             PERIPHONICS CORPORATION
             (Exact Name of Registrant as specified in its charter)

           Delaware                                    11-269950
(State or other jurisdiction of                    (I.R.S. Employer
 incorporation or organization)                     Identification No.)


             4000 Veterans Memorial Highway, Bohemia, New York 11716
                    (Address of principal executive offices)

        Registrant's telephone number, including are code: (516) 468-9000

     Check 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(s),  and (2) has been subject to such filing  requirements
for the past 90 days. Yes [X] No [ ]

     The number of shares  outstanding of each of the issuer's classes of common
stock, as of April 6, 1999 is as follows:

                         Class of               Number
                         Common Equity          of Shares

                         Common Stock,          13,101,946
                         Par value $.01



<PAGE>



                             PERIPHONICS CORPORATION
                                AND SUBSIDIARIES


                                      INDEX
<TABLE>
<CAPTION>



Part I. Financial Information                                                                Page No.
<S>                                                                                          <C>



Item 1. Financial Statements

         Consolidated Balance Sheets - February 28, 1999                                        3
         and May 31, 1998

         Consolidated Statements of  Earnings - Three Months and Nine                           4
         Months Ended February 28, 1999 and 1998

         Consolidated Statements of Cash Flows- Nine Months                                     5
         Ended February 28, 1999 and  1998

         Notes to Unaudited Consolidated Financial Statements                                  6-7

Item 2.  Management's Discussion and Analysis of Financial                                     8-14
         Condition and Results of Operations

Part II. Other Information                                                                      15

         Signatures                                                                             16

</TABLE>


<PAGE>



                                    PERIPHONICS CORPORATION AND SUBSIDIARIES
                                           CONSOLIDATED BALANCE SHEETS
                                     (In thousands, except per share data)

<TABLE>
<CAPTION>


                                                                             February 28, 1999      May 31, 1998
                                                                                (Unaudited)
<S>                                                                         <C>                     <C>

ASSETS
Current Assets:
Cash and cash equivalents ................................................     $  14,640             $  14,810
Short-term investments ...................................................         8,988                11,033
Accounts receivables, less allowance for doubtful
    accounts of $1,466 and $1,266, respectively ..........................        39,074                37,721
Inventories ..............................................................        17,256                14,066
Deferred income taxes ....................................................         2,025                 1,687
Prepaid expenses and other current assets ................................         1,461                 1,367
                                                                                 -------               -------
   Total current assets ..................................................        83,444                80,684
Property, plant and equipment, net .......................................        19,668                19,498
Other assets ................................................................        492                   425
                                                                                 -------               -------
TOTAL ASSETS  ............................................................      $103,604              $100,607
                                                                                 =======               =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable .........................................................    $    6,894            $    8,273
Accrued expenses and other current liabilities ...........................        18,535                14,328
                                                                                 -------               -------
    Total current liabilities ............................................        25,429                22,601
Deferred income taxes ....................................................          ---                    146
                                                                                 -------               -------
TOTAL LIABILITIES ......................................................          25,429                22,747
                                                                                 -------               -------
Stockholders' Equity:
Preferred stock, par value $.01 per share,                                          ---                   ---
    1,000,000 shares authorized, none issued
Common stock, par value $.01 per share,                                              139                   138
    30,000,000 shares authorized, 13,914,546 issued and
    13,351,946  shares  outstanding as of February 28, 1999; 
    13,843,305  shares issued and outstanding as of May 31, 1998
Additional paid-in capital ...............................................        44,242                43,780
Retained earnings ........................................................        37,985                33,942
                                                                                 -------               -------
                                                                                  82,366                77,860
Treasury stock at cost, 562,600 shares ...................................        (4,191)                ---
                                                                                 -------               -------
    Total stockholders' equity ...........................................        78,175                77,860
                                                                                 -------               -------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY ................................      $103,604              $100,607
                                                                                 =======               =======

</TABLE>

<PAGE>



                                 PERIPHONICS CORPORATION AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF EARNINGS
                                   (In thousands, except per share data)
                                               (Unaudited)

<TABLE>
<CAPTION>

                                                                Three Months Ended               Nine Months Ended
                                                                   February 28,                     February 28,
                                                                   ------------                     ------------
                                                              1999             1998            1999              1998
                                                              ----             ----            ----              ----
<S>                                                         <C>              <C>             <C>              <C>  


System revenues................................             $23,274           $25,852        $73,098           $63,021
Maintenance revenues ..........................               8,755             7,795         25,013            21,777
                                                             ------            ------         ------            ------
   Total revenues .............................              32,029            33,647         98,111            84,798
                                                             ------            ------         ------            ------
Cost of system revenues .......................              11,287            12,159         35,747            30,768
Cost of maintenance revenues...................               4,601             4,371         13,508            12,723
                                                             ------            ------         ------            ------
   Cost of revenues ...........................              15,888            16,530         49,255            43,491
                                                             ------            ------         ------            ------
Gross profit ..................................              16,141            17,117         48,856            41,307
                                                             ------            ------         ------            ------
Operating expenses:
    Selling, general and administrative........               9,731             9,546         29,561            26,012
    Research and development...................               4,439             3,968         13,656            10,729
                                                             ------            ------         ------            ------
                                                             14,170            13,514         43,217            36,741
                                                             ------            ------         ------            ------
Earnings from operations ......................               1,971             3,603          5,639             4,566
                                                             ------            ------         ------            ------
Other income (expense):
    Interest and other income .................                 243               322            903             1,032
    Foreign exchange loss .....................                (103)             (162)           (73)             (224)
                                                             ------            ------         ------            ------
                                                                140               160            830               808
                                                             ------            ------         ------            ------
Earnings before provision for
     income taxes .............................               2,111             3,763          6,469             5,374
Provision for income taxes ....................                 792             1,411          2,426             2,015
                                                             ------            ------         ------             -----
Net earnings ..................................            $  1,319         $   2,352      $   4,043          $  3,359
                                                             ======            ======         ======             =====

Per share data:
Basic earnings ................................           $    0.10        $     0.17     $     0.30         $    0.24
                                                             ======            ======         ======             =====
Diluted earnings ..............................           $    0.10        $     0.17     $     0.29         $    0.24
                                                             ======            ======         ======             =====

Weighted average shares:
Basic .........................................              13,393            13,784         13,538            13,744
                                                             ======            ======         ======            ======
Diluted .......................................              13,854            13,909         13,775            13,931
                                                             ======            ======         ======            ======
</TABLE>

<PAGE>




                                PERIPHONICS CORPORATION AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (In thousands)
                                              (Unaudited)
<TABLE>
<CAPTION>

                                                                                                 Nine Months Ended
                                                                                                   February 28,
                                                                                               1999            1998
<S>                                                                                          <C>             <C>   

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings ..................................................................               $4,043          $ 3,359
Adjustments to reconcile net earnings to net cash and cash                                             
    equivalents used in operating activities:
    Depreciation and amortization .............................................                4,937            3,918
    (Increase) decrease in deferred income taxes ..............................                 (484)             314
    Changes in operating assets and liabilities:
    Increase in accounts receivables ..........................................               (1,353)         (1,554)
    Increase in inventories ...................................................               (3,190)           (773)
    Increase in prepaid expenses and other current assets ....................                   (94)            (45)
    Increase in other assets ..................................................                  (67)            (34)
    Increase (decrease) in accounts payable and accrued expenses
     and other current liabilities ............................................                2,828          (2,991)
                                                                                               -----           ------
    Net cash and cash equivalents provided by operating activities ............                6,620            2,194
                                                                                               -----           ------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property, plant and equipment ................................              (5,107)         (6,099)
     Proceeds from sales of short-term investments ............................               21,495           10,691
     Purchases of short-term investments  .....................................               19,450)         (21,724)
                                                                                              ------           ------
     Net cash and cash equivalents used in investing activities ..............                (3,062)         (17,132)
                                                                                              ------           ------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Purchases of treasury stock...............................................               (4,191)            ---
     Proceeds from stock options exercised ....................................                  463              835
                                                                                              ------           ------
     Net cash and cash equivalents (used in) provided by financing
       activities .............................................................               (3,728)             835
                                                                                              ------           ------
NET DECREASE IN CASH AND CASH EQUIVALENTS .....................................                 (170)         (14,103)

CASH AND CASH EQUIVALENTS, beginning of period ................................               14,810           25,092
                                                                                              ------           ------
CASH AND CASH EQUIVALENTS, end of period ......................................              $14,640          $10,989
                                                                                              ======           ======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest ......................................................................                 ---              ---
Income Taxes ..................................................................               $1,592          $ 3,294

</TABLE>

<PAGE>



                    PERIPHONICS CORPORATION AND SUBSIDIATIES
            NOTES TO UNAUDITED CONSOLIDATION OF FINANCIAL STATEMENTS


1.      BASIS OF PRESENTATION

       In  the  opinion  of  Periphonics   Corporation  and  subsidiaries   (the
       "Company"),  the accompanying unaudited consolidated financial statements
       contain all adjustments (consisting only of normal recurring adjustments)
       necessary  to  present  fairly the  financial  position,  the  results of
       operations,  and the cash flows at February  28, 1999 and for all periods
       presented.

       Certain information and footnote  disclosures normally included in annual
       financial  statements  prepared in  accordance  with  generally  accepted
       accounting  principles  have been  omitted.  These  financial  statements
       should be read in conjunction with the Consolidated  Financial Statements
       and Notes  included in the  Company's May 31, 1998 Annual Report and Form
       10-K as filed with the Securities and Exchange Commission.

       The results of  operations  for the three and nine months ended  February
       28, 1999 and  February  28, 1998 are not  necessarily  indicative  of the
       results to be expected for the full year. Dollar amounts are presented in
       thousands except per share amount.


2.     EARNINGS PER SHARE

       In the third  quarter of fiscal 1998,  the Company  adopted  Statement of
       Financial Accounting Standards No. 128 "Earnings Per Share". Basic income
       per share is determined  using the weighted  average  number of shares of
       common stock  outstanding  during each period.  Diluted  income per share
       further assumes the issuance of common shares for all dilutive securities
       including stock options.


3.     INVENTORIES

       Inventories consist of the following:

                                   February 28, 1999         May 31, 1998
                                   -----------------         ------------

         Raw material                 $ 9,559                  $ 8,528
         Work-in-process                7,697                    5,538
                                       ------                   ------
                                      $17,256                  $14,066
                                       ======                   ======


4.     STOCKHOLDERS' EQUITY

       On September 23, 1998, the Board of Directors approved a plan to offer to
       the holders of certain outstanding stock options, excluding all executive
       officers and members of the Board of Directors, the opportunity to cancel
       their  existing  options  and  receive new options for the same number of
       shares  but with an  exercise  price per share at the then  current  fair
       market value and with new vesting requirements. As a result as of October
       8, 1998,  approximately 576,700 options with exercise prices ranging from
       $7.00 to $31.00 per share were exchanged for new options with an exercise
       price of $6.75 per share.









<PAGE>


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Results of Operations

     Nine Months Ended  February 28, 1999 compared to Nine Months Ended February
28, 1998

         Total Revenues.  Total revenues  increased by 15.7% to $98.1 million in
the first nine months of fiscal 1999 from $84.8 million in the comparable period
of the prior fiscal year. System revenues increased by 16.0% to $73.1 million in
the first nine months of fiscal  1999  compared  with $63.0  million in the same
period in the prior  fiscal year.  The increase in system  revenues was due to a
7.7% increase in domestic sales and a 31.4% increase in international sales. The
increase  in system  revenues  was  primarily  due to an  increase in unit sales
volume.  Maintenance  revenues  increased by 14.9% to $25.0 million in the first
nine months of fiscal 1999 compared with $21.8 million in the same period of the
prior  fiscal  year,  primarily  due  to  the  addition  of  more  units  to the
maintenance base.

     Gross Profit. The Company's gross profit increased by $7.6 million to $48.9
million in the first nine months of fiscal 1999  compared  with $41.3 million in
the comparable  period of the prior fiscal year. Gross profit as a percentage of
total  revenues  increased  to 49.8% in the first  nine  months  of fiscal  1999
compared with 48.7% in the comparable  period of the prior year. Gross profit on
system  revenues  increased by $5.1  million to $37.4  million in the first nine
months of fiscal 1999 compared with $32.3  million in the  comparable  period of
the prior fiscal year. The gross margin on system revenues decreased to 51.1% in
the first nine months of fiscal 1999  compared  with 51.2% in the same period of
the prior fiscal year.  The Company  attributes  this decrease  primarily to the
product mix during the current nine month period,  with a smaller  percentage of
higher margin standard  hardware and software products and to an improved margin
on custom programming revenues.

         Gross profit on  maintenance  revenues  increased by $2.4  million,  or
27.1% to $11.5  million in the first nine  months of fiscal 1999  compared  with
$9.1 million in the comparable period of the prior fiscal year. Gross margins on
maintenance  revenues increased to 46.0% in the first nine months of fiscal 1999
compared  with 41.6% in the  comparable  period of the prior  fiscal  year.  The
increase in margin was attributed to the growth in the  maintenance  base and an
increase in installation revenues.

         Selling,  General and  Administrative  Expenses.  Selling,  General and
Administrative ("SG&A") expenses were $29.6 million, or 30.1% of total revenues,
compared  with $26.0  million,  or 30.7% of total  revenues,  for the first nine
months of fiscal 1999 and 1998, respectively. The increased expense level can be
attributed  primarily  to the  Company's  continued  expansion  of its sales and
marketing  efforts designed to increase its market  penetration and market share
on a global basis.


<PAGE>


         Research and Development  Expenses.  Research and  Development  ("R&D")
expenses,  primarily  for new products and  features,  increased  27.3% to $13.7
million,  or 13.9% of total revenues,  compared with $10.7 million,  or 12.7% of
total  revenues,  for the first nine months of fiscal 1999.  The increase in the
dollar amount of R&D expenses  reflects the continued  efforts of the Company to
broaden  the  scope  of  its  product  offerings  in  order  to  address  growth
opportunities  in the  marketplace.  R&D expenses are charged to  operations  as
incurred,  and no software development costs have been capitalized.  The Company
expects such  expenditures to continue to increase,  although such expenses as a
percentage of total revenues may vary from period to period.

         Other  Income  (Expense).  Other  income was $0.8 million for both nine
month periods ended February 28, 1999 and February 28, 1998.  Interest and other
income was $0.9  million in the nine  months  ended  February  28, 1999 and $1.0
million for the nine months ended  February 28, 1998.  The Company had a foreign
exchange  loss of $0.1  million  in the nine  months  ended  February  28,  1999
compared to a foreign  exchange  loss of $0.2  million for the nine months ended
February 28, 1998. To the extent the Company is unable to match revenue received
in foreign currencies with expenses paid in the same currency,  it is exposed to
fluctuations in international currency transactions.

         Income  Taxes.  Variations in the  customary  relationship  between the
provision for income taxes and the statutory  income tax rate  primarily  result
from the utilization of research and  development  tax credits,  state and local
income taxes, and exempt income of the Company's foreign sales corporation.  The
Company's  effective  income tax rates  were  37.5% for both nine month  periods
ended February 28, 1999 and February 28, 1998.

         Foreign Operations. The Company's European subsidiary had earnings from
operations of  approximately  $4.9 million during the nine months ended February
28, 1999 as compared to a loss of  approximately  $1.2  million  during the nine
months ended February 28, 1998. These earnings were attributed to an increase in
gross profit  primarily  attributable  to an increase of  approximately  150% in
system  revenues and an increase of  approximately  16% in maintenance  revenues
offset in part by increased  SG&A expenses to support the expansion of the sales
and marketing effort.  Transfers from the Company's North American operations to
its European subsidiary are accounted for at cost, plus a reasonable profit. The
cost of revenues for the Company's European  subsidiary  includes  approximately
$1.3  million  and $0.4  million  of  intercompany  gross  profit  earned by the
Company's  North  American   operations  on  system  revenues  by  the  European
subsidiary to third parties  during the nine months ended  February 28, 1999 and
February 28, 1998, respectively.



<PAGE>


     Three  Months  Ended  February  28,  1999  compared to Three  Months  Ended
February 28, 1998

         Total  Revenues.  Total revenues  decreased by 4.8% to $32.0 million in
the third quarter of fiscal 1999  compared with $33.6 million in the  comparable
period of the prior fiscal year.  System  revenues  decreased by 10.0 % to $23.3
million in the third  quarter of fiscal 1999  compared with $25.9 million in the
comparable  period of the prior fiscal year. The decrease in system revenues was
due to a  28.8%  decrease  in  domestic  revenues  partially  offset  by a 33.7%
increase  in  international  revenues.  The  decrease  in  system  revenues  was
primarily due to a decrease in domestic unit sales volume.  Maintenance revenues
increased by 12.3% to $8.8 million in the third  quarter of fiscal 1999 compared
with $7.8 million in the comparable  period of the prior fiscal year,  primarily
due to the addition of more units to the maintenance base.

         Gross Profit.  The Company's gross profit  decreased by $1.0 million to
$16.1 million in the third quarter of fiscal 1999 compared with $17.1 million in
the comparable  period of the prior fiscal year. Gross profit as a percentage of
total  revenues  decreased to 50.4% in the third quarter of fiscal 1999 compared
with 50.9% in the  comparable  period of the prior year.  Gross profit on system
revenues  decreased  by $1.7  million to $12.0  million in the third  quarter of
fiscal 1999 compared with $13.7  million in the  comparable  period of the prior
fiscal year. The gross margin on system revenues decreased to 51.5% in the third
quarter  of fiscal  1999  compared  with  53.0% in the same  period of the prior
fiscal year. The Company  attributes this decrease  primarily to the product mix
during the current three month period with a smaller percentage of higher margin
standard  hardware  and software  products  and to an improved  margin on custom
programming revenues.

         Gross profit on  maintenance  revenues  increased by $0.7  million,  or
21.3% to $4.2  million in the third  quarter of fiscal 1999  compared  with $3.4
million in the  comparable  period of the prior  fiscal year.  Gross  margins on
maintenance  revenues  increased  to 47.4% in the third  quarter of fiscal  1999
compared  with 43.9% in the  comparable  period of the prior fiscal  year.  This
increase in margin was attributed to the growth in the  maintenance  base and an
increase in installation revenues.

         Selling,  General and  Administrative  Expenses.  Selling,  General and
Administrative  ("SG&A")  expenses  were $9.7  million and $9.5  million for the
third quarter of fiscal 1999 and 1998, respectively, or 30.4% and 28.4% of total
revenues,  respectively. The increased expense level can be attributed primarily
to the Company's continued expansion of its sales and marketing efforts designed
to increase its market penetration and market share on a global basis.

         Research and Development  Expenses.  Research and  Development  ("R&D")
expenses,  primarily  for new products  and  features,  increased  11.9% to $4.4
million,  or 13.9% of total  revenues  for the third  quarter  of  fiscal  1999,
compared with $4.0 million,  or 11.8 % of total revenues,  for the third quarter
of fiscal 1998.  The increase in the dollar amount of R&D expenses  reflects the
continued  efforts of the Company to broaden the scope of its product  offerings
in order to address growth  opportunities in the  marketplace.  R&D expenses are
charged to operations as incurred,  and no software  development costs have been
capitalized.  The Company  expects  such  expenditures  to continue to increase,
although such expenses as a percentage of total revenues may vary from period to
period.

<PAGE>

         Other Income (Expense).  Other income was $0.1 million and $0.2 million
for the three months ended  February 28, 1999 and 1998,  respectively.  Interest
and other  income was $0.2  million and $0.3  million in the three  months ended
February 28, 1999 and February 28, 1998, respectively. The Company had a foreign
exchange  loss of $0.1  million in the three  months  ended  February  28,  1999
compared to a foreign  exchange  loss of $0.2 million for the three months ended
February 28, 1998. To the extent the Company is unable to match revenue received
in foreign currencies with expenses paid in the same currency,  it is exposed to
fluctuations in international currency transactions.

         Income  Taxes.  Variations in the  customary  relationship  between the
provision for income taxes and the statutory  income tax rate  primarily  result
from the utilization of research and  development  tax credits,  state and local
income taxes, and exempt income of the Company's  foreign revenues  corporation.
The Company's  effective  income tax rates were 37.5% for the three months ended
February 28, 1999 and February 28, 1998.

Liquidity and Capital Resources

          The  Company's  principal  cash  requirement  to date has been to fund
working  capital  and  capital  expenditures  in order to support  the growth of
revenues.  Historically,  the Company has primarily  financed  this  requirement
through cash flow from operations,  bank borrowings and two public offerings for
the  Company's  common  stock in 1995,  which  resulted in an aggregate of $41.1
million of net  proceeds  to the  Company.  Cash flow from  operations  was $6.6
million and $2.2 million for the nine months  ended  February 28, 1999 and 1998,
respectively.  The Company's investing  activities included purchases of capital
expenditures totaling $5.1 million and $6.1 million during the nine months ended
February  28, 1999 and February 28,  1998,  respectively.  Financing  activities
during the first nine months of fiscal 1999  included the  repurchase of 562,600
shares of the Company's  common stock at a cost of  approximately  $4.2 million,
pursuant  to  authorization  by its Board of  Directors  during  fiscal  1999 to
repurchase up to 1,300,000 shares.

          At February 28, 1999 the Company had working capital of $58.0 million,
including $23.6 million of cash and cash equivalents and short-term investments.
The  Company  expects its working  capital  needs to increase  along with future
revenue growth.

          The Company  believes that its existing sources of working capital and
borrowing  available  under its  revolving  line of credit will be sufficient to
fund its operations and capital expenditures for at least 12 months. The Company
does not currently have any material commitments for capital expenditures.

          The Company has a $15.0 million  unsecured  line of credit with a bank
which  expires on November 30, 1999.  As of February 28, 1999 the Company had no
borrowings  under this line of credit.  Any borrowings under this line of credit
will bear interest at the prime rate or LIBOR plus 125 basis points.

          At February 28, 1999, current assets and current liabilities increased
by $2.8  million  and $1.8  million,  respectively,  compared  to May 31,  1998.
Current  assets  increased  primarily  as a result of an  increase  in  accounts
receivable and inventory  offset by a decrease in cash and cash equivalents as a
result of the repurchase of 562,600 shares the Company's  Common Stock at a cost
of approximately $4.2 million.  Current  liabilities  increased primarily due to
increased accrued expenses and other current liabilities.

<PAGE>

          The average  days sales  outstanding  (calculated  by dividing the net
accounts  receivable  at the  balance  sheet date for each period by the average
sales per day during the quarter  immediately  preceding the balance sheet date)
for this period were  approximately 110 days. The average days sales outstanding
were  107  days,  111  days,  and 83  days  at  May  31,  1998,  1997  and  1996
respectively.

          The Company's  inventory increased to $17.3 million as of February 28,
1999 from $14.1 million as of May 31, 1998.

Year 2000 Compliance

          The  Year  2000  issue  exists  because  many  computer   systems  and
applications  use two-digit date fields to designate a year. As the century date
change occurs, date sensitive systems may not be able to recognize the year 2000
or may do so  incorrectly  as the year 1900.  This  inability  to  recognize  or
properly  interpret  the year 2000 may  result in the  incorrect  processing  of
financial and operational information.

          The  Company  has   initiated  a  program  to  upgrade  its   internal
information  systems to address any year 2000  compliance  issues.  This program
includes  a  focus  on  internal  policies,   methods  and  tools,  as  well  as
coordination  with  customers and suppliers.  The Company  expects its Year 2000
program to be completed on a timely basis.  However,  there is no assurance that
the Company will  identify and resolve any and all Year 2000  compliance  issues
with its information  systems in a timely manner,  that the expenses  associated
with such efforts will not be  significant,  or that such issues will not have a
material  adverse  effect  on the  Company's  business,  operating  results  and
financial condition.

          The Company has made a thorough review and testing of its products and
believes  that its  current  products  are Year 2000  compliant.  The  Company's
assessment of its current  products is partially  dependent upon the accuracy of
representations  concerning Year 2000 compliance made by its suppliers,  such as
Sun and Microsoft,  among others.  Many of the Company's customers are, however,
using  earlier  versions of the Company's  products,  which may not be Year 2000
compliant.  The  Company  has  initiated  programs  to  proactively  notify such
customers  of the risks  associated  with using these  products  and to actively
encourage such customers to migrate to the Company's current products.

     In addition,  the  Company's  products are  generally  integrated  within a
customer's  enterprise system,  which may involve products and systems developed
by other vendors.  A customer may mistakenly  believe that Year 2000  compliance
problems with its enterprise system are attributable to products provided by the
Company. The Company may, in the future, be subject to claims based on Year 2000
compliance  issues related to a customer's  enterprise  system or other products
provided by third parties,  custom  modifications to the Company's products made
by third  parties,  or issues  arising  from the  integration  of the  Company's
products  with  other  products.  The  Company  has  not  been  involved  in any
proceeding  involving  its  products or services  in  connection  with Year 2000
compliance,  however,  there is no  assurance  that the Company will not, in the
future,  be  required to defend its  products  or  services in such  proceedings
against claims of Year 2000 compliance  issues,  and any resulting  liability of
the Company for damages  could have a material  adverse  effect on the Company's
business, operating results and financial condition.

<PAGE>

Recent Financial Accounting Standards Board Statements

          Recent  pronouncements  of the Financial  Accounting  Standards  Board
("FASB") which are not required to be adopted at this date include, Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise  and  Related  Information  ("SFAS  131"),   Statement  of  Financial
Accounting  Standards No. 132,  "Employers  Disclosures about Pensions and Other
Postretirement  Benefits"  ("SFAS 132") and  Statement  of Financial  Accounting
Standards   No.133,   "Accounting   for  Derivative   Instruments   and  Hedging
Instruments".  SFAS 131 and SFAS 132 are  effective  for fiscal years  beginning
after  December  15, 1997 and SFAS 133 is effective  for fiscal years  beginning
after June 15,  1999.  The adoption of these  pronouncements  is not expected to
have a material impact on the Company's consolidated financial statements.

          The Company adopted  Statement of Financial  Accounting  Standards No.
130  effective  June 1, 1998 and the  adoption  had no  effect on the  Company's
financial statements as the Company had no components of comprehensive income.

          In October of 1997, the Accounting  Standards  Executive  Committee of
the American  Institute  of Certified  Public  Accountants  issued  Statement of
Position  97-2  "Software  Revenue  Recognition"  ("SOP 97-2").  This  statement
provides  guidance on  applying  generally  accepted  accounting  principles  in
recognizing  revenues  on  software  transactions.   This  Statement  supercedes
Statement of Position 91-1 "Software Revenue  Recognition".  The Company adopted
SOP 97-2 effective June 1, 1998.

          Based upon  Periphonics'  reading and  interpretation of SOP 97-2, the
implementation  of SOP 97-2 has not had a material adverse affect on revenues or
earnings. However, detailed implementation guidelines for this standard have not
yet been issued. Once issued, such detailed guidance could lead to unanticipated
changes in the  Company's  current  revenue  accounting  practices  and material
adverse changes in the Company's  reported  revenues and earnings.  In the event
implementation   guidance  is  contrary  to  the  Company's  revenue  accounting
practices,  the  Company  believes  it may be  possible  to change  its  current
business  practices to comply with this guidance and avoid any material  adverse
effect on reported  revenues and  earnings.  However,  there can be no assurance
this will be the case.

Foreign Currency Transaction

          The  Company  does not  currently  engage  in  international  currency
hedging transactions to mitigate its foreign currency exposure.  Included in the
foreign  exchange gain (loss) are unrealized  foreign  exchange gains and losses
resulting from the currency remeasurement of the financial statements (primarily
inventories,   accounts   receivable  and  intercompany  debt)  of  the  foreign
subsidiaries  of the  Company  into U.S.  dollars.  To the extent the Company is
unable to match revenue received in foreign currencies with expenses paid in the
same  currency,  it is  exposed to  possible  losses on  international  currency
transactions.

Inflation

           In the opinion of management, inflation has not had a material effect
on the operations of the Company.

<PAGE>

Certain Factors That May Affect Future Results

          From time to time,  information  provided by the  Company,  statements
made by its employees or information included in its filings with the Securities
and Exchange Commission  (including this Form 10-Q) may contain statements which
are so-called  "forward-looking  statements"  and not  historical  facts.  These
forward-looking  statements  are made pursuant to the safe harbor  provisions of
the Private  Securities  Litigation  Reform Act of 1995.  The  Company's  actual
future results may differ significantly from those stated in any forward-looking
statements.   Forward-looking   statements   involve   a  number  of  risks  and
uncertainties,  including,  but not limited to, product demand,  pricing, market
acceptance,  litigation,  risks in product and technology  development and other
risk factors detailed from time to time in the Company's Securities and Exchange
Commission  reports  including  this  Form  10-Q for the  fiscal  quarter  ended
February 28, 1999 and its Form 10-K for the fiscal year ended May 31, 1998.

          The Company  undertakes no obligation to publicly update or revise any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.

          With  particular  regard  to the  possible  variability  of  quarterly
results,  fluctuations may occur as a result of factors  including the length of
the revenues cycle, the timing of orders from and shipments to customers, delays
in developments  and customer  acceptance of custom software  applications,  new
product  introductions or announcements by the company and /or competitors,  and
the  hiring  and  training  of  additional  staff  as well as  general  economic
conditions.

          Historically,   the  size  and  timing  of  the   Company's   revenues
transactions  have  varied  substantially  from  quarter,   with  a  substantial
percentage of orders and  deliveries  occurring in the final weeks of a quarter,
and the Company expects such variations to continue in future periods. Because a
significant  portion of the Company's  overhead is fixed in the short-term,  the
Company's results of operations may be materially adversely affected if revenues
fall below the Company's  expectations.  Generally,  the Company's  inventory of
computer and  telephony  hardware is  determined  by the  Company's  forecast of
revenues during the future periods. If management's forecast of product revenues
and product mix prove to be  inaccurate,  the Company may not have the necessary
inventory  available  to  deliver  systems in a timely  manner  which may have a
material  adverse  effect on the  Company's  results of  operations  during such
period.


<PAGE>


                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On July 7, 1998 Lucent Technologies, Inc. ("Lucent") filed a patent infringement
action in the United States District Court in the District of Delaware  alleging
that Periphonics infringed some nine patents of Lucent. The Company believes the
claims  contained  in the lawsuit are without  merit and, in an answer  filed on
September 24, 1998, denied the substantive  elements of Lucent's lawsuit and set
forth affirmative defenses and made counterclaims against Lucent. The Company is
involved in certain other legal  matters in the normal  course of business.  The
Company's management does not believe that resolution of these matters will have
a material adverse effect on the Company's consolidated financial statements.

Item 2. Changes in Securities

         None

Item 3. Defaults Upon Senior Securities

         None

Item 4.  Submission of Matters to a Vote of Security Holders

          None

Item 5. Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

         None


<PAGE>



                                   SIGNATURES

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

                                           PERIPHONICS CORPORATION
                                           Registrant


                                       By: /s/Peter J. Cohen
                                           ---------------------------
                                           Peter J. Cohen
                                           Chairman of the Board, President
                                             And Chief Executive Officer
                                           (Principal Operating Officer)


                                       By: /s/Kevin J. O'Brien
                                           ---------------------------
                                           Kevin J. O'Brien
                                           Chief Financial Officer, Vice
                                           President-Finance and Administration
                                           (Principal Accounting Officer),
                                           Secretary and Director


Date: April 14, 1999