SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10Q

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

                  For the quarterly period ended March 31, 2001

                                       OR

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

          For the transition period from______________to_______________


                        COMMISSION FILE NUMBER: 000-25590


                            DATASTREAM SYSTEMS, INC.

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

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

                    50 DATASTREAM PLAZA, GREENVILLE, SC 29605

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

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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes _X_ No ___

APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding
of the issuer's common stock as of the latest  practicable  date: March 31, 2001
20,511,955 shares, $0.01 par value.


<PAGE>





                            Datastream Systems, Inc.

                                    FORM 10-Q

                          Quarter ended March 31, 2001

                                      Index

                                                                        Page No.

Part I.    Consolidated Financial Information

           "Safe Harbor" Statement under the Private Securities
               Litigation Reform Act of 1995                               3

Item 1.    Consolidated Financial Statements (unaudited)

           Consolidated Balance Sheets-
               December 31, 2000 and March 31, 2001
                Assets                                                     4
                Liabilities and Stockholders' Equity                       5

           Consolidated Statements of Operations -
                for the Three Months ended March 31,  2000 and 2001        6

           Consolidated Statement of Changes in Stockholders' Equity
                and Comprehensive Income (Loss) -
                for the Three Months ended March 31, 2001                  7

           Consolidated Statements of Cash Flows - for the Three
                Months ended March 31, 2000 and 2001                       8

           Notes to the Consolidated Financial Statements                  9

Item 2.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations                   11

Item 3.    Quantitative and Qualitative Disclosures About                  13
           Market Risk


Part II.   Other Information                                               14


Signature                                                                  15


<PAGE>



PART I.     CONSOLIDATED FINANCIAL INFORMATION


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

     From time to time, we make oral and written  statements that may constitute
"forward looking  statements"  (rather than historical  facts) as defined in the
Private  Securities  Litigation  Reform  Act of  1995 or by the  Securities  and
Exchange  Commission  (the  "SEC")  in  its  rules,  regulations  and  releases,
including Section 27A of the Securities Act of 1933, as amended (the "Securities
Act") and Section 21E of the  Securities  Exchange Act of 1934,  as amended (the
"Exchange Act"). We desire to take advantage of the "safe harbor"  provisions in
the  Private  Securities  Litigation  Reform  Act of 1995  for  forward  looking
statements  made from time to time,  including,  but not limited to, the forward
looking statements made in this Quarterly Report on Form 10-Q (the "Report"), as
well as those made in other filings with the SEC.

     Forward looking  statements can be identified by our use of forward looking
terminology  such  as  "may,"  "will,"   "expect,"   "anticipate,"   "estimate,"
"believe,"  "continue" or other similar words.  Such forward looking  statements
are based on our management's  current plans and expectations and are subject to
risks,  uncertainties  and changes in plans that could cause  actual  results to
differ materially from those described in the forward looking statements. In the
preparation of this Report,  where such forward looking  statements  appear,  we
have sought to accompany such statements with meaningful  cautionary  statements
identifying  important  factors  that  could  cause  actual  results  to  differ
materially from those described in the forward looking statements.  Such factors
include,  but are not limited to: our ability to successfully  transition to the
development of further Internet-based  products; the continued acceptance of the
Internet for business  transactions;  our ability to  successfully  implement an
application  service  provider  business  model;  increasing  competition in the
markets in which we compete;  our ability to enhance  our current  products  and
develop new products that address  technological  and market  developments;  the
stability  of  certain  of our  strategic  relationships,  including  those with
iProcure network suppliers and technology providors;  increasing  competition in
markets for our  products;  our ability to protect our  proprietary  technology;
risks  associated with managing  international  operations,  including,  but not
limited  to,  exposure  to  foreign  exchange  fluctuations  and our  ability to
successfully  compete in foreign markets;  fluctuations in quarterly results due
to seasonality and longer sales cycles; retaining our key personnel; and changes
in economic conditions generally, both domestic and international. The preceding
list of risks and uncertainties,  however, is not intended to be exhaustive, and
should be read in  conjunction  with other  cautionary  statements  that we make
herein  including,  but not  limited  to,  the "Risk  Factors"  set forth in the
Company's  Form 10-K for the fiscal year ended  December  31,  2000,  as well as
other risks and  uncertainties  identified from time to time in our SEC reports,
registration statements and public announcements.

     We do not have, and expressly disclaim,  any obligation to release publicly
any  updates  or any  changes  in our  expectations  or any  changes  in events,
conditions or circumstances on which any forward-looking statement is based.


                                      -3-
<PAGE>



ITEM 1.  Consolidated Financial Statements

                    Datastream Systems, Inc. and Subsidiaries

                           Consolidated Balance Sheets
                                  (unaudited)
                                     Assets

                                                   December 31,       March 31,
                                                       2000             2001
                                                       ----             ----
Current assets:
   Cash and cash equivalents                        $15,487,515     $18,641,249
   Accounts receivable, net of allowance
        for doubtful accounts of
        $3,183,453 and $ 2,976,557, respectively     22,939,649      20,852,119
   Unbilled revenue, net of allowance of
      $156,000 and $137,500, respectively             2,065,745       2,195,248
   Investments                                              160             160
   Prepaid expenses                                   1,615,325       1,721,417
   Inventories                                          125,059          84,973
   Income tax receivable                              9,504,889      10,091,855
   Deferred income taxes                              3,665,000       3,133,000
   Other assets                                       1,358,525       1,481,760
                                                      ---------       ---------
        Total current assets                         56,761,867      58,201,781

Investments                                           2,000,000       2,000,000
Property and equipment, net                          14,125,640      14,314,672
Goodwill, net                                        12,051,577      11,296,161
Other long term assets                                  343,750         275,000
                                                        -------         -------
        Total assets                                $85,282,834     $86,087,614
                                                    ===========     ===========

See accompanying notes to consolidated financial statements.



                                      -4-
<PAGE>



                    Datastream Systems, Inc. and Subsidiaries

                     Consolidated Balance Sheets (Continued)
                                   (unaudited)
                      Liabilities and Stockholders' Equity

                                                   December 31,       March 31,
                                                       2000             2001
                                                       ----             ----

Current liabilities:
   Accounts payable                                  $3,464,121      $4,338,668
   Other accrued liabilities                         10,824,994       8,373,142
   Current portion of long-term debt                    213,642         177,085
   Unearned revenue                                  10,174,327      12,742,202
                                                     ----------      ----------
        Total current liabilities                    24,677,084      25,631,097
Long-term debt, less current portion                      8,116               -
                                                     ----------      ----------
        Total liabilities                            24,685,200      25,631,097
                                                     ----------      ----------
Stockholders' equity:
   Preferred stock, $1 par value,
        1,000,000 shares authorized; none issued              -               -
   Common stock, $.01 par value,
        40,000,000 shares authorized;
        20,730,644 shares issued at December 31, 2000,
        20,933,455 shares issued at March 31, 2001      207,306         209,334
   Additional paid-in capital                        80,985,427      82,856,299
   Accumulated deficit                              (16,083,208)    (17,326,376)
   Other accumulated comprehensive loss                (459,128)     (1,077,430)
   Treasury stock, at cost;
        405,000 shares at December 31, 2000,
        421,500 shares at March 31, 2001             (4,052,763)     (4,205,310)
                                                     ----------      ----------
        Total stockholders' equity                   60,597,634      60,456,517
                                                     ----------      ----------
        Total liabilities and stockholders' equity  $85,282,834     $86,087,614
                                                    ===========     ===========

See accompanying notes to consolidated financial statements.


                                      -5-
<PAGE>


                    Datastream Systems, Inc. and Subsidiaries

                      Consolidated Statements of Operations
                                   (unaudited)
                   Three months ended March 31, 2000 and 2001

                                                     March 31,       March 31,
                                                       2000             2001
                                                       ----             ----

Revenues:
   Product                                         $  7,552,929    $  7,433,535
   Service and support                               17,698,015      17,099,353
                                                     ----------      ----------
      Total revenues                                 25,250,944      24,532,888

Cost of revenues:
   Cost of product revenues                             462,141         666,839
   Cost of service and support revenues              10,569,107       8,999,948
                                                     ----------      ----------
      Total cost of revenues                         11,031,248       9,666,787
                                                     ----------      ----------
      Gross profit                                   14,219,696      14,866,101

Operating expenses:
   Sales and marketing                               11,476,286       9,915,845
   Product development                                4,227,046       3,372,705
   General and administrative                         3,006,895       2,461,537
   Goodwill amortization                                755,416         755,416
                                                     ----------      ----------
      Total operating expenses                       19,465,643      16,505,503
                                                     ----------      ----------
      Operating loss                                 (5,245,947)     (1,639,402)

Other income (expense):
   Interest and other income                            161,235         119,291
   Interest expense                                     (31,000)        (25,849)
                                                     ----------      ----------
      Net other income                                  130,235          93,442
                                                     ----------      ----------
      Loss before income taxes                       (5,115,712)     (1,545,960)

Income tax benefit                                   (2,047,934)       (302,792)
                                                     ----------      ----------
Net loss                                           $ (3,067,778)   $ (1,243,168)
                                                   ============    ============

   Basic net loss per share                        $       (.16)   $       (.06)
                                                   ------------    ------------
   Diluted net loss per share                      $       (.16)   $       (.06)
                                                   ------------    ------------

   Basic weighted average number of common and
      potential common shares outstanding            19,602,852      20,497,870
   Diluted weighted average number of common and
      potential common shares outstanding            19,602,852      20,497,870

See accompanying notes to consolidated financial statements.


                                      -6-
<PAGE>

<TABLE>


                    Datastream Systems, Inc. and Subsidiaries

      Consolidated Statement of Stockholders' Equity and Comprehensive Loss
                                   (unaudited)

                        Three months ended March 31, 2001
<CAPTION>

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

Balance at December 31, 2000    $207,306   $80,985,427  $(16,083,208)  $ (459,128) $(4,052,763)     $60,597,634

Comprehensive loss
   Net loss                            -             -    (1,243,168)           -            -       (1,243,168)
   Foreign currency
        translation adjustment         -             -             -     (618,302)           -         (618,302)
                                                                                                     ----------
Total comprehensive loss                                                                             (1,861,470)
                                                                                                     ----------

Exercise of stock options            418       337,896             -            -            -          338,314

Stock issued for Employee
   Stock Purchase Plan               285       235,759             -            -            -          236,044

Amortization of compensatory
   stock options                       -        48,542             -            -            -           48,542

Acquisition of 16,500 shares           -             -             -            -     (152,547)        (152,547)


Shares issued for legal
        settlement                 1,325     1,248,675             -            -            -        1,250,000

                                --------   -----------   -----------    ---------  -----------      -----------
Balance at March 31, 2001       $209,334   $82,856,299  $(17,326,376) $(1,077,430) $(4,205,310)     $60,456,517
                                ========   ===========   ===========    =========  ===========      ===========

<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>

                                      -7-
<PAGE>

                    Datastream Systems, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows
                                   (unaudited)

                   Three months ended March 31, 2000 and 2001

                                                     March 31,       March 31,
                                                       2000             2001
                                                       ----             ----

Cash flows from operating activities:
   Net loss                                         $(3,067,778)    $(1,243,168)
   Adjustments to reconcile net loss to net cash
    provided by operating activities:
      Depreciation                                    1,272,672       1,242,015
      Goodwill amortization                             755,416         755,416
      Other amortization                                      -          68,750
      Provision for doubtful accounts                     5,617        (225,396)
      Stock based compensation                           59,402          48,542
      Issuance of shares in legal settlement                  -       1,250,000
      Changes in operating assets and liabilities:
       Accounts receivable                            2,141,117       2,294,426
       Unbilled receivable                              (82,838)       (111,003)
       Income taxes receivable                       (3,742,623)       (586,966)
       Prepaid expenses                                (520,421)       (106,092)
       Inventories                                       17,687          40,086
       Deferred income taxes                                  -         532,000
       Other assets                                    (475,616)       (123,235)
       Accounts payable                                 499,416         874,547
       Other accrued liabilities                      1,896,466      (2,451,852)
       Unearned revenue                               2,894,792       2,567,875
                                                      ---------       ---------
       Net cash provided by operating activities      1,653,309       4,825,945
                                                      ---------       ---------

Cash flows from investing activities:
   Purchase of investments                           (2,000,000)              -
   Proceeds from sale and maturities of investments     124,337               -
   Additions to property and equipment               (2,117,470)     (1,431,047)
                                                      ---------       ---------
       Net cash used in investing activities         (3,993,133)     (1,431,047)
                                                      ---------       ---------

Cash flows from financing activities:
   Proceeds from exercise of stock options            5,702,832         338,314
   Proceeds from issuances of shares under employee
       stock purchase plan                              237,054         236,044
   Cash paid to acquire treasury stock                        -        (152,547)
   Principal payments on long-term debt                (732,933)        (44,673)
                                                      ---------       ---------
       Net cash provided by financing activities      5,206,953         377,138
                                                      ---------       ---------

Foreign currency translation adjustment                (180,234)       (618,302)

Net increase in cash and cash equivalents             2,686,895       3,153,734
Cash and cash equivalents at beginning of period     17,912,797      15,487,515
                                                     ----------      ----------
Cash and cash equivalents at end of period          $20,599,692     $18,641,249
                                                    ===========     ===========

See accompanying notes to consolidated financial statements.

                                      -8-
<PAGE>

                    Datastream Systems, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements


1)  Summary of Significant Accounting Policies

A. Organization and Basis of Presentation

Datastream  Systems,  Inc. (the "Company" or "Datastream") is a leading provider
of  asset  lifecycle  management  solutions.   The  Company's  solutions  enable
businesses,   government  agencies  and  other  organizations  to  maximize  the
profitability  of assets in the four distinct  phases of their  lifecycle:  buy,
track,  manage,  and sell. A component of this  lifecycle is the  procurement of
spare parts used to maintain assets.  The Company's  iProcure solution automates
this  process by  connecting  suppliers  with buyers of  industrial  spare parts
through the Internet. In addition to its U.S. operations, the Company has direct
sales offices in Argentina,  Australia,  Brazil, Canada, China, France, Germany,
Japan, Mexico, The Netherlands, Singapore, and the United Kingdom.

The  interim  financial  information  included  herein  is  unaudited.   Certain
information  and  footnote   disclosures  normally  included  in  the  financial
statements have been condensed or omitted  pursuant to the rules and regulations
of the Securities and Exchange  Commission (SEC),  although the Company believes
that the  disclosures  made are adequate to make the  information  presented not
misleading.  In the opinion of management,  such unaudited  information reflects
all  adjustments,  consisting  only  of  normal  recurring  accruals  and  other
adjustments  as  disclosed  herein,  necessary  for a fair  presentation  of the
unaudited information. These consolidated financial statements should be read in
conjunction  with  the  consolidated  financial  statements  and  related  notes
contained in the Company's  Form 10-K for the year ended December 31, 2000 filed
with the SEC on March 30, 2001. Other than as indicated herein,  there have been
no significant changes from the financial data published in those reports.

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

B.    Accounting Policies

Revenue Recognition

The  Company's  revenue,  which  consists  primarily of fees for product  sales,
professional  services and customer  support,  is recognized in accordance  with
American  Institute  of  Certified  Public  Accountants  ("AICPA")  Statement of
Position 97-2 ("SOP 97-2"),  "Software Revenue Recognition".  SOP 97-2 generally
requires revenue earned on software  arrangements  involving  multiple  elements
(i.e., software products, upgrades/enhancements,  postcontract customer support,
installation,  training,  etc.) to be  allocated  to each  element  based on the
relative fair values of the elements. The fair value of an element must be based
on evidence which is specific to the entity.  The revenue  allocated to software
products  (including  specified  upgrades/enhancements)  generally is recognized
upon delivery of the products.  The revenue  allocated to postcontract  customer
support generally is recognized ratably over the term of the support and revenue
allocated to service elements (such as training and  installation)  generally is
recognized as the services are performed.  Revenue from hosted software  service
arrangements  is  recognized  ratably over the term of the hosting  arrangement.
Revenue  from  transaction  service  fees  is  generally   recognized  when  the
transaction has occurred.

In December 1998, the AICPA issued SOP 98-9  Modification of SOP 97-2,  Software
Revenue  Recognition,  with  Respect to  Certain  Transactions,  which  requires
recognition  of  revenue  using  the  "residual  method"  in a  multiple-element
arrangement  when fair  value  does not  exist for one or more of the  delivered
elements in the arrangement.  Under the residual method, the total fair value of
the undelivered elements is deferred and subsequently,  recognized in accordance
with SOP 97-2. The Company adopted SOP 98-9 effective  January 1, 2000 and there
was no material effect on its financial position,  results of operations or cash
flows.

In December 1999, the staff of the SEC issued Staff Accounting  Bulletin No. 101
("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101, as amended,
summarizes some of the staff's  interpretations  of the application of generally
accepted accounting  practices to revenue  recognition.  The Company adopted SAB
101 in  fiscal  year  2000 and there  was no  material  effect on the  financial
position, results of operations or cash flows.

The Company  continually  evaluates its obligations  with respect to warranties,
returns and refunds.  Based on historical trends and management's  evaluation of
current conditions,  any potential obligations that are inherent in the accounts
receivable  balance  are  adequately  provided  for through  the  allowance  for
doubtful accounts.  The Company may in certain circumstances grant discounts for
product sales.  The discounts are recognized in the product  revenue at the time
of shipment.

                                      -9-
<PAGE>


Net Income (Loss) Per Share

Basic net income  (loss) per share is computed by dividing net income  (loss) by
the weighted  average  number of common shares  outstanding.  Diluted net income
(loss) per share is  computed  by  dividing  net income  (loss) by the  weighted
average  number of common and  potential  dilutive  common  shares  outstanding.
Diluted  weighted  average common and potential  dilutive  common shares include
common  shares and stock options  using the treasury  stock method,  except when
those shares result in antidilution.  Antidilutive shares totaling 2,653,279 and
3,557,294  in the  first  quarter  of  2000  and  the  first  quarter  of  2001,
respectively,  were excluded from the diluted net income (loss) calculation.  At
March 31, 2000 and March 31, 2001, basic loss per share equaled diluted loss per
share.

C. Segment and Geographic Information

The Company has identified one business  segment for reporting  purposes:  Asset
Lifecycle  Management.  The  Company  manages  the  Asset  Lifecycle  Management
business over geographical regions. The principal areas of operation include the
United States,  Europe, Latin America and Asia. Financial information concerning
the Company's operations in different geographical regions is as follows:
<TABLE>
For the three months ended March 31, 2000 and 2001:
<CAPTION>
                        United                         Latin
                        States          Europe        America         Asia            Total
<S>                     <C>             <C>           <C>             <C>             <C>
March 31, 2000:

Total revenues          $16,529,091  $ 5,796,408    $ 1,350,882     $ 1,574,563     $25,250,944
Operating income (loss)  (5,433,378)     (31,081)       260,461         (41,949)     (5,245,947)
Total assets             67,590,248   15,750,385      3,577,359       4,752,327      91,670,319

March 31, 2001:

Total revenues           16,322,398    5,057,362      1,801,783       1,351,345      24,532,888
Operating income (loss)  (2,469,190)     517,193        183,495         129,100      (1,639,402)
Total assets             64,534,368   13,706,772      4,065,213       3,781,261      86,087,614

</TABLE>

The United  States  revenues  include  international  revenues of  approximately
$1,098,000 and $676,000 for the first quarters of 2000 and 2001, respectively.

D. Recent Accounting Pronouncements

In June 1998, the Financial  Accounting  Standards Board (FASB) issued Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments and Hedging Activities"  (Statement No. 133). In July 1999, the FASB
issued  Statement of Financial  Accounting  Standards No. 137,  "Accounting  for
Derivative  Instruments  and Hedging  Activities - Deferral of Effective Date of
FASB Statement No. 133 - an amendment of FASB Statement No. 133"  (Statement No.
137). Statement No. 137 delayed the effective date for Statement No. 133 for one
year. In June 2000 the FASB issued Statement of Financial  Accounting  Standards
No. 138.  "Accounting  for Certain  Derivative  Instruments  and Certain Hedging
Activity,  an Amendment to SFAS 133" (Statement No. 138). Statements No. 133 and
No. 138 require that all derivative instruments be recorded on the balance sheet
at their respective fair values.  The Company adopted Statements No. 133 and No.
138 in the first  quarter  of 2001.  The  Company  had no  derivative  financial
instruments in place during the first quarter of 2001.

E. Commitments and Contingencies

During  2000,  the  Company  reached an  agreement  to settle  the  consolidated
securities  class action  litigation  filed against the Company in January 1999.
Under the agreement all claims  against the Company and all of the  individually
named defendants have been dismissed. In agreeing to the settlement, the Company
and the individual  defendants  specifically  denied any wrongdoing or liability
relating to the claims made in the litigation.  The principal financial terms of
the  agreement  called for  payment to the  plaintiffs,  for the  benefit of the
class, of a total of $5.00 million in a combination of $3.75 million in cash and
$1.25 million in shares of the Company's  common stock (which was  determined to
be 132,571 shares).  The Company's insurance carrier funded $2.40 million of the
settlement.  The Company paid the cash portion of the  settlement  in the fourth
quarter of 2000 and issued the common  stock  portion of the  settlement  in the
first quarter of 2001.

The  Company  is  occasionally  involved  in  other  claims  arising  out of its
operations  in the  normal  course  of  business,  none of which  are  expected,
individually  or in the  aggregate,  to have a  material  adverse  affect on the
Company.

                                      -10-
<PAGE>

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

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

Overview

     Datastream is a leading provider of asset lifecycle  management  solutions.
These solutions enable businesses,  government  agencies and other organizations
to maximize the  profitability  of assets in the four  distinct  phases of their
lifecycle:  buy, track, manage, and sell. As a result, assets perform for longer
periods  of time,  reducing  requirements  to  procure  new  capital  assets and
increasing the total  profitability of existing assets. One important  component
of this  lifecycle is the  procurement  of spare parts used to maintain  assets.
Datastream's  iProcure solution  automates this process by connecting  suppliers
with buyers of  industrial  spare parts through the  Internet.  Combined,  these
offerings  create a complete,  scaleable  asset  lifecycle  management  solution
representing a unique value proposition to the market.

     The Company's products consist of three major categories based on price and
functionality.  MP2  Professional  provides asset  management  solutions for the
small to medium  size  facility;  MP5i  offers  internet-based  asset  lifecycle
management  solutions for the larger,  multi-site  global client  needing a full
featured enterprise  solution,  and is also offered as a hosted solution through
MPXconnect;  and iProcure is an internet  procurement  application  that enables
customers to automate  their  industrial  procurement.  Datastream  supports its
products with professional and support services.

Results of Operations

     Total  Revenues.  Total  revenues  decreased 3% to $24,532,888 in the first
quarter of 2001 from  $25,250,944 in the first quarter of 2000, due  principally
to unfavorable market conditions,  longer sales cycles and decreased service and
support  revenue  resulting  from  decreased  license  revenues.   International
revenues  were  approximately  $8,886,000  (36% of total  revenues) in the first
quarter of 2001 and  approximately  $9,820,000  (39% of total  revenues)  in the
first quarter of 2000. See Note C to consolidated financial statements.

     Product revenues  decreased 2% to $7,433,535 (30% of total revenues) in the
first  quarter  of 2001 from  $7,552,929  (30% of total  revenues)  in the first
quarter of 2000, as a result of unfavorable  market  conditions and longer sales
cycles.

     Service and support  revenues  decreased  3% to  $17,099,353  (70% of total
revenues) in the first quarter of 2001 from  $17,698,015 (70% of total revenues)
in the first  quarter of 2000.  The decrease is a result of  decreased  software
license  revenues  resulting  in  decreased  installation,  training and support
services revenue.

     Cost of Revenues.  Cost of revenues  decreased  12% to  $9,666,787  (39% of
total revenues) in the first quarter of 2001, as compared to $11,031,248 (44% of
total  revenues) in the first quarter of 2000.  The decrease in cost of revenues
is due to cost  savings  realized by the services  and support  department  as a
result of improved utilization and improved organizational efficiency.

     Cost of product  revenues was 3% of total  revenues in the first quarter of
2001 and 2% of total  revenues in the first quarter of 2000. The increase is due
to  increased  sales of third  party  add-ons  resulting  in  increased  royalty
expense.

     Cost of service and support revenues was 37% of total revenues in the first
quarter of 2001,  and 42% of total  revenues in the first  quarter of 2000.  The
decrease as a percentage  of total  revenues for the quarter was due to improved
utilization rates and a reduction in employee-related costs.

     Sales and Marketing Expenses. Sales and marketing expenses decreased 14% to
$9,915,845 (40% of total revenues) in the first quarter of 2001 from $11,476,286
(45% of total  revenues)  in the first  quarter of 2000.  The decrease is due to
cost  savings  realized  upon  consolidation  of  certain  product   departments
resulting in decreased  employee-related costs and decreased sales and marketing
expenditures for internet related initiatives.

     Product  Development  Expenses.   Total  product  development  expenditures
decreased 20% to $3,372,705 (14% of total revenues) in the first quarter of 2001
from $  4,227,046  (17% of total  revenues)  in the first  quarter of 2000.  The
decrease  in total  product  development  expense  resulted  from  cost  savings
realized  upon  consolidation  of the  iProcure  development  team  with the MP5
development team and a reduction in outside contract labor costs.

     General and Administrative  Expenses.  General and administrative  expenses
decreased 18% to $2,461,537 (10% of total revenues) in the first quarter of 2001
from  $3,006,895  (12% of total revenues) in the first quarter of 2000, due to a
reduction in costs  associated with managing the iProcure product and a decrease
in the allowance for doubtful accounts.

     Goodwill Amortization. Amortization of goodwill expense was $755,416 (3% of
total  revenues)  during  the first  quarter of 2001 and  $755,416  (3% of total
revenues) in the first quarter of 2000.

                                      -11-
<PAGE>

     Interest and other income.  Interest and other income decreased to $119,291
in the first  quarter of 2001 from  $161,235 in the first  quarter of 2000.  The
decrease was due to a one time gain on the sale of stock in the first quarter of
2000 and a decrease in long-term investment balances.

     Interest  Expense.  Interest  expense  decreased  to  $25,849  in the first
quarter of 2001 from  $31,000 in the first  quarter of 2000,  due to lower third
party debt balances.

     Tax Rate. The Company's effective tax rate was 20% for the first quarter of
2001 as  compared  to 40% for the first  quarter of 2000.  The  decrease  in the
effective  tax rate is due to the  impact of the  Company's  permanent  book/tax
differences including amortization of goodwill, as a percentage of pretax loss.

     Net loss. Net loss improved to $(1,243,168) ((5%) of total revenues) in the
first quarter of 2001 from  $(3,067,778)  ((12%) of total revenues) in the first
quarter  of  2000.  The  improvement  is  attributed  to  increased  operational
efficiency  and  a  reduction  in  costs   associated   with  internet   related
initiatives.

Liquidity and Capital Resources

     The  Company  has  funded  its  operating  activities  primarily  from cash
generated  from  operations.  The Company  ended its first  quarter of 2001 with
$18,641,249 in cash and cash equivalents  defined as securities maturing in less
than 90 days.

     On February 26, 2001 the Company  announced that its board of directors had
authorized the repurchase of up to 500,000  shares of  Datastream's  outstanding
common  stock.  The  repurchased  shares  will be  used  for  general  corporate
purposes,  including  grants of employee  stock  options.  At March 31, 2001 the
Company had  repurchased  16,500 shares at a cost of $152,547.  The  repurchased
shares  will be added  to the  405,000  treasury  shares  (cost  of  $4,052,763)
repurchased  by the company in 1999. The shares are classified as treasury stock
on the balance sheet and are reported at cost.

     The  Company's  principal  commitments  as of  March  31,  2001,  consisted
primarily of long-term debt and there were no material  commitments  for capital
expenditures. The Company believes that its current cash balances,  availability
under its lines of credit and cash flow from  operations  will be  sufficient to
meet its working capital and capital expenditure needs for the next 12 months.

                                      -12-
<PAGE>



ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk


     The Company did not experience  any material  changes in market risk in the
first quarter of 2001.



                                      -13-
<PAGE>



PART II.     OTHER INFORMATION

Item 1.    Legal Proceedings

     During 2000,  the Company  reached an agreement to settle the  consolidated
securities  class action  litigation  filed against the Company in January 1999.
Under the agreement all claims  against the Company and all of the  individually
named defendants have been dismissed. In agreeing to the settlement, the Company
and the individual  defendants  specifically  denied any wrongdoing or liability
relating to the claims made in the litigation.  The principal financial terms of
the  agreement  called for  payment to the  plaintiffs,  for the  benefit of the
class, of a total of $5.00 million in a combination of $3.75 million in cash and
$1.25 million in shares of the Company's  common stock (which was  determined to
be 132,571 shares).  The Company's insurance carrier funded $2.40 million of the
settlement.  The Company paid the cash portion of the  settlement  in the fourth
quarter of 2000 and issued the common  stock  portion of the  settlement  in the
first quarter of 2001.

     The Company is  occasionally  involved in other  claims  arising out of its
operations  in the  normal  course  of  business,  none of which  are  expected,
individually  or in the  aggregate,  to have a  material  adverse  affect on the
Company.

Item 2.    Changes in Securities and Use of Proceeds

           None

Item 3.    Defaults Upon Senior Securities

           None

Item 4.    Submission of Matters to a Vote of Stockholders

           None

Item 5.    Other Information

           None

Item 6.    Exhibits and Reports on Form 8-K

(a)        Exhibits
                None

           (b)  Reports on Form 8-K
                The Company filed a Current Report on Form 8-K on February 26,
                2001 to report the Company's announcement of a stock repurchase
                plan.


                                      -14-
<PAGE>




SIGNATURES



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


                               Datastream Systems, Inc.


                               /s/ C. Alex Estevez
Date:   05/10/01                    ______________________
                                    C. Alex Estevez
                                    Chief Financial Officer (principal
                                    financial and accounting officer)



                                      -15-