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 June 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 0-25524


                               HELLO DIRECT, INC.
             (Exact name of registrant as specified in its charter)


                   DELAWARE                            94-3043208
        (State or other jurisdiction of              (IRS Employer
          incorporation or organization)              Identification No.)



               5893 RUE FERRARI                          95138-1858
             SAN JOSE, CALIFORNIA                        (Zip Code)
   (Address of principal executive offices)


      Registrant's telephone number, including area code:  (408) 972-1990

     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     
                                  -----    -----          


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                                              Outstanding at
          Class                               July 24, 1998
          -----                               -------------
Common Stock, Par Value $.001                   5,112,757
<PAGE>




HELLO DIRECT, INC.
FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS



PART I - Financial Information

Item 1. -- Financial Statements 

        Condensed Balance Sheets as of June 30, 1998 and December 31, 1997

        Condensed Statements of Operations for the Three and Six Months 
        Ended June 30, 1998 and 1997          

        Condensed Statements of Cash Flows for the Six Months Ended
        June 30, 1998 and 1997  

        Notes to Condensed Financial Statements                 

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

        Results of Operations           

        Liquidity and Capital Resources         

        Additional Factors Affecting Future Performance         


Part II - Other Information

Items 1 through 3 and Item 5 are not applicable with respect to the 
current reporting period.

Item 4 - Submission of matters to a vote of security holders            

Item 6. - Exhibits and Reports on Form 8-K              

Signatures                      

Part 1.  Financial Information
Item 1.   Financial Statements

                              HELLO DIRECT, INC.
                           CONDENSED BALANCE SHEETS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                   June 30,       December 31,
                                                   1998           1997
                                                   -------------  -------------
                                                   (unaudited)
<S>                                                <C>            <C>
                             ASSETS
Current assets:
     Cash and cash equivalents                           $1,707         $5,135
     Short-term investments                               6,499          3,830
     Trade accounts receivable, less allowance for
       returns and doubtful accounts                      6,524          5,752
     Inventories                                          6,111          5,137
     Deferred tax assets                                    677            821
     Other current assets                                 1,453          1,771
                                                   -------------  -------------
      Total current assets                               22,971         22,446

Notes receivable                                          4,393          4,542
Property and equipment, net                               4,663          4,819
Long-term deferred tax assets                                 -             25
                                                   -------------  -------------
     Total assets                                       $32,027        $31,832
                                                   =============  =============

           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                    $2,669         $3,856
     Accrued expenses                                     1,176          1,319
                                                   -------------  -------------
      Total current liabilities                           3,845          5,175
Non-current liabilities                                     200              -
                                                   -------------  -------------
      Total liabilities                                   4,045          5,175

Stockholders' equity:
     Common stock                                             5              5
     Additional paid-in capital                          28,188         28,045
     Accumulated deficit                                    234           (948)
     Less treasury stock, at cost                          (445)          (445)
                                                   -------------  -------------
      Total stockholders' equity                         27,982         26,657
                                                   -------------  -------------
      Total liabilities and stockholders' equity        $32,027        $31,832
                                                   =============  =============
</TABLE>
           See accompanying notes to condensed financial statements.
<PAGE>

                              HELLO DIRECT, INC.
                         CONDENSED STATEMENTS OF INCOME
                     (In thousands, except per share data)
                                  (unaudited)
<TABLE>
<CAPTION>
                                         Three Months Ended    Six Months Ended
                                              June 30,             June 30,
                                       -------------------  --------- ---------
                                       1998      1997       1998      1997
                                       --------- ---------  --------- ---------
<S>                                    <C>       <C>        <C>       <C>
Net sales                               $16,620   $15,318    $34,530   $31,254
Cost of goods sold                        7,670     7,542     15,989    15,395
                                       --------- ---------  --------- ---------
      Gross profit                        8,950     7,776     18,541    15,859

Selling, general and administrative
  expenses                                7,866     6,923     16,076    14,264
Product development expenses                323       371        902       781
                                       --------- ---------  --------- ---------
      Operating income                      761       482      1,563       814
Other income - net                          204       152        407       321
                                       --------- ---------  --------- ---------
      Income before income taxes            965       634      1,970     1,135
Income taxes                                386       264        788       465
                                      --------- ---------  --------- ---------
      Net income                           $579      $370     $1,182      $670
                                       ========= =========  ========= =========

Basic per share amounts:
  Net income                              $0.11     $0.07      $0.23     $0.13
                                       ========= =========  ========= =========
  Weighted average shares outstanding     5,111     5,031      5,100     5,023
                                       ========= =========  ========= =========
Diluted per share amounts:
  Net income                              $0.11     $0.07      $0.23     $0.13
                                       ========= =========  ========= =========
  Weighted average shares outstanding     5,242     5,110      5,211     5,089
                                       ========= =========  ========= =========
</TABLE> 
           See accompanying notes to condensed financial statements.
<PAGE>

                              HELLO DIRECT, INC.
                      CONDENSED STATEMENTS OF CASH FLOWS
                                (unaudited)
<TABLE>
<CAPTION>
                                                               Six Months Ended
                                                                   June 30,
                                                        ------------------------
                                                         1998         1997
                                                        -----------  -----------
<S>                                                      <C>          <C>
Cash flows from operating activities:
   Net income                                                $1,182         $670
   Adjustments to reconcile net income to net cash
   provided (used in) operating activities:
        Depreciation and amortization                           800          584
        Deferred income taxes                                   257          364
        Deferred rent                                            90            -
        Allowance for returns and doubtful accounts             (75)         109
        Changes in items affecting operations:     
             Trade accounts receivable                         (687)      (1,086)
             Inventories                                       (974)        (806)
             Other current assets                               318       (1,010)
             Accounts payable and accrued expenses           (1,308)       1,301
                                                         -----------  -----------
        Net cash provided (used) in operating activities       (397)         126
                                                         -----------  -----------
Cash flows from investing activities:
   Purchases of property and equipment                         (643)      (1,861)
   Decrease (increase) in investments                        (2,669)       2,400
   Funding of note receivable                                     -       (1,227)
   Payments received on note receivable                         138            -
                                                         -----------  -----------
        Net cash used in investing activities                (3,174)        (688)
                                                         -----------  -----------
Cash flows from financing activities:
   Payments on capital lease obligations                          -          (18)
   Sale of common stock, net                                    143           95
                                                         -----------  -----------
        Net cash provided by financing activities               143           77
                                                         -----------  -----------
Net decrease in cash and cash equivalents                    (3,428)        (485)
Cash and cash equivalents at beginning of period              5,135        2,492
                                                         -----------  -----------
Cash and cash equivalents at end of period                   $1,707       $2,007
                                                         ===========  ===========
</TABLE>
           See accompanying notes to condensed financial statements.
<PAGE>





HELLO DIRECT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

1. Interim Financial Statements

In the opinion of the management of Hello Direct, Inc. (the 
"Company"), the accompanying unaudited financial statements include 
all adjustments, consisting only of normal recurring adjustments 
necessary to present fairly the financial information set forth 
therein. 

The condensed financial statements have been prepared by the Company 
without audit and are subject to year-end adjustment.  Certain 
information and footnote disclosures normally included in financial 
statements prepared in accordance with generally accepted accounting 
principles have been condensed or omitted pursuant to the rules and 
regulations of the Securities and Exchange Commission.  

It is suggested that these interim statements be read in conjunction 
with the audited financial statements and notes thereto included in 
the Company's annual report (Commission File Number 0-25524) filed on 
Form 10-K for the fiscal year ended December 31, 1997. 

Results of operations for the three and six-month periods ended June 
30, 1998 are not necessarily indicative of future financial results.

2. Net Income Per Share

There were no adjustments to net income for purposes of the 
calculation of diluted net income per share.  The table below 
reconciles basic weighted average shares outstanding to diluted 
weighted average shares outstanding:

                                        Three months ended      Six months ended
                                            June 30,               June 30,
                                          1998       1997        1998       1997
                                    ---------- ----------  ---------- ----------
Basic weighted shares outstanding    5,111,000  5,031,000   5,100,000  5,023,000

Common stock options utilizing
  treasury stock method when dilutive  131,000     79,000     111,000     66,000
                                    ---------- ----------  ---------- ----------
Diluted weighted shares outstanding  5,242,000  5,110,000   5,211,000  5,089,000
                                    ========== ==========  ========== ==========

3. Recently Adopted Accounting Pronouncements

In 1997, the Financial Accounting Standards Board issued SFAS No. 130, 
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures About 
Segments of an Enterprise and Related Information."  The Company 
adopted both of these standards on January 1, 1998.  The adoption of 
SFAS No. 130 and SFAS No. 131 did not have a material effect on the 
financial statements of the Company.

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

This Management's Discussion and Analysis section contains forward-
looking statements that involve risks and uncertainties.  The 
Company's actual results may differ significantly from the results 
discussed in the forward-looking statements.  Factors that might cause 
such a difference include, but are not limited to, those discussed 
below and in the Company's reports filed with the Securities and 
Exchange Commission including the Company's annual report on Form 10-K 
for the year ended December 31, 1997 (the "Form 10-K"). The forward-
looking statements contained herein are made as of the date hereof, 
and the Company assumes no obligation to update such forward-looking 
statements or to update reasons actual results could differ materially 
from those anticipated in such forward-looking statements.  Forward-
looking statements are identified with an asterisk (*).

RESULTS OF OPERATIONS

Three Months Ended June 30, 1998 Compared to Three Months Ended June 
30, 1997

Net Sales.      Net sales reflect total sales less a provision for 
returns.  Net sales increased $1,302,000 or 8.5% to $16,620,000 in the 
three-month period ended June 30, 1998, from $15,318,000 for the 
comparable period in 1997. This increase was primarily attributable to 
a 1.5% increase in the number of catalogs mailed, to 6.7 million from 
6.6 million, and an increase in the average order size, to $257 from 
$253.

Gross Profit.    Gross profit increased $1,174,000 or 15.1% to 
$8,950,000 in the three-month period ended June 30, 1998, from 
$7,776,000 for the comparable period in 1997.  The gross margin for 
the three-month period was 53.8% for 1998 versus 50.8% for 1997. This 
increase in gross margin was the result of a shift in product mix 
toward higher margin products including a larger percentage of 
proprietary products which carry higher gross margins.

Selling, General and Administrative Expenses.   Selling, general and 
administrative expenses increased $943,000 or 13.6% to $7,866,000 in 
the three-month period ended June 30, 1998, from $6,923,000 for the 
comparable period in 1997.  The increase for the three-month period in 
1998 compared to the same period in 1997 was associated with planned 
headcount additions to the Company's corporate (outbound) 
telemarketing group and administrative management group, and to 
consulting costs incurred in the initial evaluation and selection of 
software solutions as part of the Company's systems evolution and
upgrade plan.   As a percentage of net sales, these expenses for the
three-month  period increased to 47.3% in 1998 as compared to 45.2%
for the same  three-month period in 1997. A significant portion of
the Company's  selling, general and administrative expenses are
related to the  production, printing and distribution of its
catalog.  Any significant  increase in the cost of paper or postage,
or deterioration in the  response rates to mailings, would have a
material adverse effect on  the Company's operating results.

Product Development Expenses.   Product development expenses declined 
$48,000 or 12.9% to $323,000 for the three-month period ended June 30, 
1998, from $371,000 for the comparable period in 1997.  As a 
percentage of net sales, these expenses for the three-month period 
were 1.9% for 1998 versus 2.4% for the same three-month period in 
1997.  The decline was due to a project schedule revision for the 
development of new products to be introduced later this year.  It is 
anticipated these expenses will fluctuate from time to time based upon 
the number and character of the products under development, however, 
the Company believes these expenses, as a percentage of net sales, 
will increase for the year ending December 31, 1998, over the prior 
year.*

Other Income-net.  Other income includes interest income of $203,000 
for the three-month period ended June 30, 1998 versus $152,000 for the 
comparable period in 1997. The interest income relates to interest 
earned on cash investments, short-term investments and on the 
outstanding note receivable.

Net Income.     Net income increased $209,000 or 56.5% to $579,000 in the 
three month period ended June 30, 1998, from $370,000 for the 
comparable period in 1997.  This increase was due to the reasons 
discussed above.


Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 
1997

Net Sales.      Net sales increased $3,276,000 or 10.5% to $34,530,000 in 
the six-month period ended June 30, 1998, from $31,254,000 for the 
comparable period in 1997. 

Gross Profit.    Gross profit increased $2,682,000 or 16.9% to 
$18,541,000 in the six-month period ended June 30, 1998, from 
$15,859,000 for the comparable period in 1997.  The gross margin for 
the six-month period was 53.7% for 1998 versus 50.7% for 1997. This 
increase in gross margin was the result of a shift in product mix 
toward higher margin products including a larger percentage of 
proprietary products which carry higher gross margins.

Selling, General and Administrative Expenses.   Selling, general and 
administrative expenses increased $1,812,000 or 12.7% to $16,076,000 
in the six-month period ended June 30, 1998, from $14,264,000 for the 
comparable period in 1997. The dollar increase for the six-month 
period in 1998 compared to the same period in 1997 was associated with 
planned headcount additions to the Company's corporate (outbound) 
telemarketing group, administrative management group, product 
management team, customer care activities and consulting costs.  As a
percentage of net  sales, these expenses for the three-month period
increased to 46.6% in  1998 as compared to 45.6% for the same
six-month period in 1997. A  significant portion of the Company's
selling, general and  administrative expenses are related to the
production, printing and  distribution of its catalog.  Any
significant increase in the cost of  paper or postage, or
deterioration in the response rates to mailings,  would have a
material adverse effect on the Company's operating  results.

Product Development Expenses.   Product development expenses increased 
$121,000 or 15.5% to $902,000 for the six-month period ended June 30, 
1998, from $781,000 for the comparable period in 1997.  As a 
percentage of net sales, these expenses for the six-month period were 
2.6% for 1998 versus 2.5% for the same six-month period in 1997. The 
increase was due to the development of new products scheduled for 
introduction later this year.  It is anticipated these expenses will 
fluctuate from time to time based upon the number and character of the 
products under development, however, the Company believes these 
expenses, as a percentage of net sales, will increase for the year 
ending December 31, 1998, over the prior year.*

Other Income-net.  Other income includes interest income of $408,000 
for the six-month period ended June 30, 1998 versus $320,000 for the 
comparable period in 1997. The interest income relates to interest 
earned on cash investments, short-term investments and on the 
outstanding note receivable. 

Net Income.     Net income increased $512,000 or 76.4% to $1,182,000 in 
the six-month period ended June 30, 1998, from $670,000 for the 
comparable period in 1997.  This increase was due to the reasons 
discussed above.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity have been cash flow from 
operations, proceeds from its initial public offering, venture capital 
equity and debt financing, and borrowings under its revolving bank 
line of credit.

Cash used in operating activities during the six-month period ended 
June 30, 1998 was $397,000.  This was the result of $2,254,000 
provided by net income, depreciation and amortization and other non-
cash charges offset by $2,651,000 of changes in operating assets and 
liabilities. Cash used in investing activities for the six-month 
period ended June 30, 1998 was $3,174,000, due primarily to purchases 
of property and equipment of $643,000 and an increase in short-term 
investments of $2,669,000, offset by $138,000 of principal payments 
received on the note receivable. Cash provided by financing activities 
during the six-month period ended June 30, 1998, was $143,000, 
relating primarily to the issuance of common stock pursuant to the 
Company's employee stock purchase plan.

Additions to equipment during the six-month period ended June 30, 1998 
were $643,000 compared to $1,861,000 for same period in the prior 
year. The Company plans to expend between $2,000,000 and $2,500,000 
for capital equipment for the year ending December 31, 1998.* 

The Company believes funds generated from operations, together with 
available funds remaining from the net proceeds of its initial public 
offering, will be sufficient to finance its working capital needs for 
the foreseeable future.*   Should the Company require additional funds, 
it has available though a major financial institution a $7,000,000 
unsecured revolving line of credit at that institution's prime lending 
rate. During the six-month period ended June 30, 1998, the Company did 
not directly borrow against this credit facility.

Impact of the Year 2000 Issue

The year 2000 issue results from computer programs written using a two
digit date field rather than four to define the applicable year.
Certain of the Company's computer programs utilizing a two digit date
field may recognize a date using "00" as the year 1900 rather than the
year 2000. This could potentially result in a system failure or
miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send
invoices, or engage in other similar normal business activities. The
Company plans to upgrade its computer software to increase operational
efficiencies and information analysis and ensure that the new systems
properly recognize dates beyond December 31, 1999. The cost of this
upgrade project, as it relates to the year 2000 issue, is not expected
to have a material effect on the operations of the Company and will be
funded through operating cash flows.

ADDITIONAL FACTORS AFFECTING OPERATING RESULTS AND MARKET PRICE OF 
STOCK

        Hello Direct operates in a rapidly changing environment that 
involves a number of uncertainties, some of which are beyond the 
Company's control.  In addition to the uncertainties described 
elsewhere in this report, these uncertainties include:

        Future Operating Results Uncertain.  The Company has grown rapidly 
and achieved profitability in the past five years as a result of a 
substantial increase in catalog mailings, strong growth in the number 
of active customers and the success of its product offering, 
particularly of its proprietary headset products.  There can be no 
assurance that the Company will maintain profitability on a quarterly 
or annual basis or continue to increase its net sales.  Continued 
growth in the Company's net sales will depend on, among other things, 
the Company's ability to increase sales to existing customers, grow 
its customer base and expand its product offering.  The Company's 
operating results could be materially adversely affected if the 
Company were to experience lower than anticipated catalog response 
rates from existing and prospective customers, higher than anticipated 
product return rates or higher than anticipated increases in paper and 
postal costs.  There can be no assurance that the Company will 
continue to achieve growth in net sales or that such growth will 
offset increases in operating expenses.  Operating results could also 
be materially adversely affected by delays in new product 
introductions, poor product selection and market acceptance of new 
products or increased competition.  See "Management's Discussion and 
Analysis of Financial Condition and Results of Operations."

        Fluctuations in Quarterly Operating Results.  The Company has 
experienced in the past and will experience in the future quarterly 
variations in net sales and net income as a result of many factors, 
including the number and timing of catalog mailings; catalog response 
rates; product mix; the level of selling, general and administrative 
expenses; the timing and level of product development expenses; and 
the timing and success of new product introductions by the Company or 
its competitors.  The Company's planned operating expenditures are 
based on sales forecasts.  If net sales are below expectations in any 
given quarter, operating results would be materially adversely 
affected.  Due to the foregoing factors, it is possible that in some 
future quarter the Company's operating results will be below the 
expectations of public market analysts and investors.  In such event, 
the price of the Company's Common Stock would likely be materially 
adversely affected.

        Rapidly Changing Technology; Need to Successfully Develop New 
Products.  The market for telecommunications products is generally 
characterized by rapidly changing technology that can render existing 
products obsolete and unmarketable.  The Company believes its current 
and future success will depend on its ability to use its direct 
customer contacts and product development capabilities to identify, 
develop or source and successfully introduce and market in a timely 
manner both enhancements to its existing products and new products 
that respond effectively to technological change.  The Company has 
experienced delays in the past in introducing certain of its products 
and could encounter similar technical difficulties in the future that 
will result in delayed product introductions or expensive recalls.  
There can be no assurance that the Company will be successful in 
anticipating technological changes or in selecting and developing new 
and enhanced products on a timely basis, or that, once developed or 
sourced, any such products will gain market acceptance. 

        Dependence on Headset Products.  More than 50% of the Company's net 
sales in the first two quarters of 1998 were derived from sales of the 
Company's proprietary telephone headset products, which have higher 
gross margins than its other products.  The Company anticipates that 
these headset products will continue to account for a significant 
portion of its net sales and profits in the foreseeable future. *   If 
sales of the Company's telephone headset products were to decline 
significantly for any reason, or the gross margins on such products 
were to decrease significantly for any reason, including competitive 
pressures or technological obsolescence, the Company's operating 
results would be materially adversely affected. 

        Dependence on Sole or Limited Source Suppliers and Foreign 
Manufacturing.  A substantial portion of the Company's private label 
and proprietary products are manufactured by a  relatively small 
number of manufacturers, and most of such products, including all 
headset products, are manufactured by only three sources.  To date, 
the Company has been able to obtain adequate supplies of these 
products, although on occasion the Company has incurred additional 
delivery costs to air ship products to obtain inventory in a timely 
manner.  The Company's inability in the future to obtain sufficient 
quantities of sole or limited source products, or to develop 
alternative sources, would result in shortages of such products, which 
would have a material adverse effect on the Company's net sales and 
operating results.

        A substantial portion of Hello Direct's proprietary products are 
manufactured to its specifications by Seo Won K-Tec, Inc., located in 
South Korea and the Philippines, Sinoca Enterprises Co. Ltd., located 
in Taiwan, and Transtech Electronics Pte. Ltd., located in Singapore.  
Each of these manufacturers is a substantial supplier to the Company, 
and products manufactured by these manufacturers represented 
approximately 50% of the Company's net sales in the first two quarters 
of 1998.  The Company has no long-term contracts with such 
manufacturing sources and competes with other companies for production 
facilities.  Although the Company believes that it has established 
close relationships with these foreign manufacturing sources, the 
Company's future success will depend in large measure upon its ability 
to maintain such relationships.

        The Company's business is subject to the risks generally associated 
with doing business abroad, such as foreign governmental regulations, 
political unrest, disruptions or delays in shipments and changes in 
economic conditions in countries in which the Company's manufacturing 
sources are located.  The Company cannot predict the effect that such 
factors will have on its business arrangements with foreign 
manufacturing sources.  If any such factors were to render the conduct 
of business in a particular country undesirable or impractical, or if 
the Company's current foreign manufacturing sources were to cease 
doing business with the Company for any reason, the Company's business 
and operating results could be adversely affected.  Further, the 
Company cannot predict whether additional United States quotas, 
duties, taxes or other charges or restrictions will be imposed upon 
the importation of its products in the future, or what effect any such 
actions would have on its business, financial condition and results of 
operations. 

        Competition.  The market for customer premise telecommunications 
products is highly competitive.  The Company competes with a variety 
of traditional dealers and retailers, including catalog companies, 
electronics specialty stores and office products and computer 
superstores.  A variety of external and internal factors could 
adversely affect the Company's ability to compete.  These include the 
functions, performance, price and reliability of the products offered 
by the Company and its competitors, the timing and success of new 
product development efforts of the Company and its competitors, and 
the effectiveness of the marketing efforts of the Company and its 
competitors.  Certain competitors of the Company have greater 
financial, technical, sales and marketing and other resources than the 
Company.  There can be no assurance that the Company will compete 
effectively against existing competitors or against new competitors 
that may enter the market.  In addition, while the Company currently 
does not know of any competitor specializing in distributing a broad 
line of telecommunications products directly to business end-users via 
catalog, there can be no assurance that the Company will be able to 
compete successfully in the future in either the direct marketing 
catalog channel, which may attract new market entrants, or in other 
channels that the Company may enter or that may be developed for 
telecommunications products for such customers.  

        Increase in Costs of Catalog Mailing, Paper and Printing.  
Increases in postal rates and paper and printing costs increase the 
cost of the Company's catalog mailings.  An increase in postal rates 
or higher than anticipated paper and printing costs could have a 
material adverse impact on the Company's financial position and 
results of operations to the extent that the Company is unable to pass 
such increase directly on to customers by raising prices or to offset 
such increase by implementing more efficient printing, mailing and 
delivery systems.  See "Management's Discussion and Analysis of 
Financial Condition and Results of Operations."

        Risks Associated with Managing a Growing Business.  The Company has 
experienced significant growth in its operations that has placed 
significant demands on the Company's administrative, operational and 
financial resources.  The growth in the Company's customer base and 
changes in its product offering have placed, and are expected to 
continue to place, a significant strain on the Company's management 
and operations, including on its product development, customer service 
and finance and administration staffs.  The Company's future 
performance will depend in part on its ability to successfully 
implement enhancements to its management information systems and to 
adapt those systems, as necessary, to respond to changes in its 
business. The inability of the Company to successfully integrate and 
train new hires could have a material adverse effect on the Company's 
business or results of operations.  The failure of the Company's 
management to respond to and manage changing business conditions could 
materially adversely affect the Company's business or financial 
condition and results of operations.  See "Management's Discussion and 
Analysis of Financial Condition and Results of Operations."

        Dependence on Single Facility.  The Company's telemarketing, 
customer service and distribution functions are housed in a single 
facility in San Jose, California.  The Company has taken precautions 
to protect itself from events that could interrupt order fulfillment 
and customer service, such as offsite storage of computer backup data 
and a backup power source.  Notwithstanding these precautions, there 
can be no assurance that a fire, flood, earthquake or other disaster 
affecting the Company's facility would not disable these functions.  
Any significant damage to this facility would have a material adverse 
effect on the Company's business, financial condition and results of 
operations.

        Dependence on Key Personnel.  The Company's future success will 
depend to a significant extent on the efforts of its key management 
personnel.  The loss of the services of any of these individuals could 
have a material adverse effect on the Company's business, financial 
condition and results of operations.  Except for Messrs. Glover and 
Waldera, none of the Company's executive officers has entered into an 
employment agreement with the Company.  The Company does not maintain 
key-man life insurance on any of these individuals.

        Competition for employees with technical, management, customer 
service and other skills is intense in the telecommunications products 
industry.  The Company's failure to retain and attract additional 
qualified employees could negatively affect the Company's business.

        State Sales Tax Collection.  The Company presently collects retail 
occupation tax, commonly referred to as sales tax, or other similar 
tax, only on sales of products to residents of the State of 
California.  Several states have sought to impose on direct marketers 
the burden of collecting state sales taxes on the sale of products 
shipped to those states' residents.  The United States Supreme Court 
has held that it is unconstitutional for a state to impose tax 
collection obligations on an out-of-state mail order company whose 
only contacts with the taxing state are the distribution of catalogs 
and other advertisement materials through the mail and whose 
subsequent delivery of purchased goods is by United States mail or 
interstate common carriers.  In the event of a change in present law, 
the imposition of a tax collection obligation on the Company by states 
into which it ships products may result in additional administrative 
expenses to the Company and price increases to the customer, which 
could adversely affect the Company's operating results.

        Government Regulation of Mailing Lists. The Company seeks to expand 
its in-house list of customers and potential customers ("House List") 
by continually renting appropriate mailing lists and sending its 
catalogs to prospects obtained from these lists.  In the event that 
the federal or state governments enact privacy legislation resulting 
in the increased regulation of mailing lists, the Company's ability to 
enhance and expand its House List could be adversely affected.  In 
such event, the Company could also experience increased costs in 
complying with potentially burdensome regulations concerning the 
solicitation of consents to keep or add customer names to Hello 
Direct's mailing lists.

        Risks Associated With Intellectual Property Rights.  The Company 
relies on a combination of patent, copyright, trademark and trade 
secret laws and contractual provisions to protect its proprietary 
rights in its products.  As part of its confidentiality procedures, 
the Company generally enters into non-disclosure agreements with its 
employees, distributors and corporate partners, and limits access to 
and distribution of its software, documentation and other proprietary 
information.  Despite these precautions, it may be possible for a 
third party to copy or otherwise obtain and use the Company's products 
or technology independently.  In addition, effective protection of 
intellectual property rights may be unavailable or limited in certain 
foreign countries.

        There are no currently pending material claims that the Company's 
products, trademarks or other proprietary rights significantly 
infringe the proprietary rights of third parties.  However, there can 
be no assurance that the Company will not receive in the future 
communications from third parties asserting that the Company's 
products infringe, or may infringe, the proprietary rights of third 
parties.  There can be no assurance that licenses to disputed third-
party technology would be available on reasonable commercial terms, if 
at all.  In the event of litigation to determine the validity of any 
third-party claims, such litigation, whether or not determined in 
favor of the Company, could result in significant expense to the 
Company and divert the efforts of the Company's technical and 
management personnel from productive tasks.  In the event of an 
adverse ruling in such litigation, the Company might be required to 
discontinue the use and sale of infringing products, expend 
significant resources to develop non-infringing technology or obtain 
licenses to infringing technology. In the event of a successful claim 
against the Company and the failure of the Company to develop or 
license a substitute technology, the Company's business and operating 
results would be adversely affected. 

        Product Liability and Insurance.  Sale of the Company's proprietary 
and other products through the catalog and alternate channels entails 
the risk of product liability claims, although the Company has not 
experienced any claims to date.  While the Company believes that its 
product liability insurance coverage is currently adequate, such 
coverage is limited, and there can be no assurance that such insurance 
can be maintained in the future at a reasonable cost or in amounts 
sufficient to protect the Company against losses due to liability.  A 
successful product liability claim brought against the Company in 
excess of relevant insurance coverage could have a material adverse 
effect on the Company's business, financial condition and results of 
operations.

        Volatility of Stock Price.  The market price of the shares of 
Common Stock has been volatile and may be significantly affected by 
factors such as actual or anticipated fluctuations in the Company's 
operating results, announcements of technological innovations or new 
products by the Company or its competitors, developments with respect 
to intellectual property and proprietary rights, conditions and trends 
in the telecommunications and telephone headset industries, changes in 
earnings estimates or buy-sell recommendations by securities analysts, 
general market conditions and other factors.  In addition, the stock 
market has from time to time experienced significant price and volume 
fluctuations that have particularly affected the market prices for the 
common stocks of emerging growth companies and that have often been 
unrelated to the operating performance of particular companies.  These 
broad market fluctuations may also adversely affect the market price 
of the Company's Common Stock.

* This statement is a forward-looking statement reflecting current
expectations.  There can be no  assurance that the Company's actual future
performance will meet the Company's current expectations.   Investors are
strongly encouraged to review the section herein and in Form 10-K entitled
"Factors  Affecting Operating Results and Market Price of Company Stock" 
for a discussion of factors that could  affect future performance.


PART II -- OTHER INFORMATION


Items 1 through 3 are not applicable with respect to the current 
reporting period.

Item 4 - Submission of matters to a vote of security holders

At the Annual Meeting of Stockholders of the Company, held on May 6, 
1998, in San Jose, California, the stockholders elected seven 
directors to serve until the next Annual Meeting of Stockholders; 
ratified and approved an amendment to the Company's Employee Stock 
Purchase Plan increasing the number of shares of Common Stock reserved 
for issuance thereunder by 150,000 to a total of 305,000;  and 
ratified the appointment of KPMG Peat Marwick LLP as independent 
public accountants of the Company for the fiscal year ending December 
31, 1998.

                                                                       Broker
Item                                        For     Against  Abstain  Non-Vote
                                        ----------- -------- -------- --------
Election of Directors
--------------------
  C. Allen Batts                         3,536,172      500     -        -
  John W. Combs                          3,536,172      500     -        -
  E. Alexander Glover                    3,536,172      500     -        -
  Deepak Kamra                           3,536,172      500     -        -
  John B. Mumford                        3,536,172      500     -        -
  William P. Sousa                       3,536,172      500     -        -
  Charles E. Volwiler                    3,536,172      500     -        -

Approve Amendment to 1995 Stock Purchase Plan
---------------------------------------------
                                         3,534,372    1,600      700     -

Approve KPMG Peat Marwick LLP
----------------------------
                                         3,534,972      300    1,400     -




Item 5 - Not applicable.

Item 6. -- Exhibits and Reports on Form 8-K:

a.  Exhibits

10.1 Revolving Line of Credit Note between Hello Direct, Inc. and 
Wells Fargo Bank

10.2  Loan Agreement between Hello Direct, Inc. and Wells Fargo 
Bank

10.3  Form of Employee Severance Agreement entered into by and between
the Company and each of its executive officers

10.4 Form of Stock Option Agreement under the 1995 Stock Plan

27.1  Financial Data Schedule


b.  Reports on Form 8-K.

 No reports on Form 8-K were filed with the Securities and 
Exchange Commission during the quarter ended June 30, 1998.






SIGNATURES


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


                                                        HELLO DIRECT, INC.
                                                         (Registrant)




July 24, 1998                                    /s/    Raymond E. Nystrom
-------------                                   --------------------------
Date                                               Raymond E. Nystrom
                                                 Chief Financial Officer