UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549

                                   Form 10-Q


Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                                  Act of 1934

For the Quarter ended   March 31, 1999 

Commission File Number  0-19943


                            PROTOCOL SYSTEMS, INC.
------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)


            Oregon                                        93-0913130
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   (State or other jurisdiction of                        (I.R.S. Employer
    incorporation or organization)                        Identification No.)


      8500 SW Creekside Place, Beaverton, OR                     97008        
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      (Address of principal executive offices)                   (Zip Code)

                                 (503) 526-8500
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             (Registrant's telephone number, including area code)


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.

                                                        [X] Yes    [  ] No

              Number of shares of common stock outstanding as of
                               May 7, 1999:
                  8,323,638 shares, $.01 par value per share
                  ------------------------------------------









<PAGE>2

                             PROTOCOL SYSTEMS, INC.

                              Index to Form 10-Q


PART I  FINANCIAL INFORMATION                                         Page No.
-----------------------------                                         --------

Item 1. Financial Statements
      
        Condensed Consolidated Statements of
        Operations and Comprehensive Income for
        the three months ended March 31, 1999 and 1998                    3

        Condensed Consolidated Balance Sheets
        as of March 31, 1999 and December 31, 1998                        4

        Consolidated Statements of Cash Flows for
        the three months ended March 31, 1999 and 1998                    5

        Notes to Condensed Consolidated Financial
        Statements                                                      6-8

Item 2. Management's Discussion and Analysis of
        Financial Condition and Results of Operations                   9-12

Item 3. Quantitative and Qualitative Disclosures about 
        Market Risk                                                    12-13


PART II  OTHER INFORMATION
--------------------------

Item 2. Changes in Securities                                            14

Item 4. Submission of Matters to a Vote of Security Holders              14

Item 6. Exhibits and Reports on Form 8-K                                 14


SIGNATURES                                                               15
----------













PAGE<3>

ITEM 1. FINANCIAL STATEMENTS

<TABLE>
                         PROTOCOL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                   (in thousands except per share amounts)
                             (unaudited)



                                         Three months ended March 31,
                                               1999       1998
                                              ------     ------
<S>                                          <C>        <C>
Sales                                        $14,299    $14,920
Cost of sales                                  7,344      8,007
                                             -------    -------
    Gross profit                               6,955      6,913

Operating expenses:
  Research and development expenses            1,505      1,859
  Selling, general and administrative
   expenses                                    4,745      5,015
                                             -------    -------
    Total operating expenses                   6,250      6,874
                                             -------    -------
    Income from operations                       705         39

Other income                                     262        280
                                             -------    -------
    Income before income taxes                   967        319

Provision for income taxes                       242         89
                                             -------    -------
    Net income                               $   725    $   230
                                             =======    =======
 
    Comprehensive income                     $   499    $   237
                                             =======    =======

    Basic earnings per share                 $  0.09    $  0.03
                                             =======    =======
    Diluted earnings per share               $  0.09    $  0.03
                                             =======    =======

Weighted average number of shares
used in the computation of:  
    Basic earnings per share                   8,241      8,794
    Diluted earnings per share                 8,385      9,134




       See accompanying notes to condensed consolidated financial statements
</TABLE>

PAGE<4>
<TABLE>
                           PROTOCOL SYSTEMS, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                             (in thousands)
                               (unaudited)


                                                                 March 31, December 31,
                                                                   1999         1998
                                                                  ------       ------
<S>                                                              <C>          <C>
ASSETS
Current assets:
  Cash and cash equivalents                                      $12,848      $ 8,023
  Short-term investments                                           1,000        6,680
  Accounts receivable - net                                       13,398       17,971
  Inventories - net                                               11,596       12,218
  Prepaid expenses and other current assets                        1,790        2,469
                                                                 -------      -------
    Total current assets                                          40,632       47,361

Long-term investments                                              9,675        4,045
Property and equipment - net                                       3,874        4,041
Other assets                                                         617          404
                                                                 -------      -------
                                                                 $54,798      $55,851
                                                                 =======      =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                               $ 2,543      $ 2,584
  Accrued liabilities                                              3,558        5,481
                                                                 -------      -------
    Total current liabilities                                      6,101        8,065

Deferred taxes                                                         3           40

Commitments and contingencies

Shareholders' equity:
  Common stock, $.01 par value.  Authorized 30,000 shares;
    issued and outstanding 8,274 at 1999 and 8,207 at 1998            83           82
  Additional paid-in capital                                      28,505       28,105
  Unearned compensation                                               --          (48)
  Accumulated other comprehensive income (loss)                      (21)         205
  Retained earnings                                               20,127       19,402
                                                                 -------      -------
    Total shareholders' equity                                    48,694       47,746
                                                                 -------      -------
                                                                 $54,798      $55,851
                                                                 =======      =======


       See accompanying notes to condensed consolidated financial statements
</TABLE>



<PAGE>5
<TABLE>
                                    PROTOCOL SYSTEMS, INC.
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       (in thousands)
                                        (unaudited)

                                                         Three months ended March 31,
                                                              1999         1998
                                                             ------       ------
<S>                                                         <C>          <C>
Cash flows from operating activities:
 Net income                                                 $   725      $   230

 Adjustments to reconcile net income to net cash
   provided by operating activities:
   Depreciation and amortization                                560          535
   Amortization of bond premium                                  31           53
   Provision for deferred taxes                                 144           91
   Other non-cash items                                          71           -
 Increase (decrease) in cash resulting from
    changes in:
     Accounts receivable                                      4,501        1,621
     Inventories                                                563        1,404
     Prepaid expenses and other assets                          130          (51)
     Accounts payable and accrued liabilities                (1,304)        (670)
                                                             -------      -------
        Net cash provided by operating activities             5,421        3,213

Cash flows from investing activities:
  Purchase of investments                                   (10,030)      (3,886)
  Proceeds from maturity of investments                       9,980        1,978
  Acquisition of property and equipment                        (357)        (629)
  Expenditures for other assets                                (250)        (443)
                                                             -------      -------
        Net cash used in investing activities                  (657)      (2,980)

Cash flows from financing activities:
  Proceeds from exercise of stock options
   and stock purchase plan                                      506          743
  Repurchase of common stock                                   (128)      (4,293)
                                                            -------      -------
        Net cash provided by (used in) financing activities     378       (3,550)
                                                            -------      -------

Effect of exchange rates on cash and cash equivalents          (317)          (5)
                                                            -------      -------

        Net increase (decrease) in cash and cash equivalents  4,825       (3,322)

Cash and cash equivalents at beginning of period              8,023       12,257
                                                            -------      -------
Cash and cash equivalents at end of period                  $12,848      $ 8,935
                                                            =======      =======

Supplemental disclosure of cash flow information:
 Cash paid for income taxes                                $    -        $   545

       See accompanying notes to condensed consolidated financial statements
</TABLE>

<PAGE>6
                            PROTOCOL SYSTEMS, INC.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been 
prepared by the Company without audit and in conformity with generally 
accepted accounting principles for interim financial information.  
Accordingly, certain financial information and footnotes have been omitted or 
condensed.  In the opinion of management, the condensed consolidated financial 
statements include all necessary adjustments (which are of a normal and 
recurring nature) for the fair presentation of the results of the interim 
periods presented.  These financial statements should be read in conjunction 
with the Company's audited consolidated financial statements for the year 
ended December 31, 1998.  The results of operations for the interim period 
shown in this report are not necessarily indicative of results for any future 
interim period or the entire fiscal year.


INVENTORIES

Inventories are valued at the lower of cost or market with cost determined on 
the first-in, first-out basis (FIFO). The components of inventories, net of 
reserve, are as follows:

                                               March 31,     December 31,
(in thousands)                                   1999            1998
-------------------------------------------------------------------------
Raw materials                                  $ 4,901         $ 4,939
Work in process                                  2,493           2,838
Finished goods                                   2,060           2,207
Demonstration instruments                        2,142           2,234
                                               -------          ------
   Total inventories                           $11,596         $12,218
                                               =======          ======


PROPERTY AND EQUIPMENT

Property and equipment is stated at cost and includes the following: 

                                               March 31,     December 31,
(in thousands)                                   1999            1998
-------------------------------------------------------------------------
Equipment                                      $12,675         $12,111
Furniture and fixtures                           1,913           1,910
Leasehold improvements                             456             551
                                                ------          ------
                                                15,044          14,572
Less accumulated depreciation and amortization  11,170          10,531
                                                ------          ------
   Property and equipment - net                $ 3,874         $ 4,041
                                                ======          ======


<PAGE>7

ACCRUED LIABILITIES

The components of accrued liabilities are as follows:

                                               March 31,     December 31,
(in thousands)                                   1999            1998
-------------------------------------------------------------------------
  Accrued salaries, wages and
   related liabilities                          $2,322          $2,588
  Accrual for special charges                      187           1,642
  Reserve for warranties                           853             915
  Deferred revenue and customer deposits            85              98
  Other liabilities                                111             238
                                                ------          ------
                                                $3,558          $5,481
                                                ======          ======

On December 31, 1998, the Company incurred special charges of $3,188,000 as it 
discontinued the development of its defibrillator project and restructured its 
worldwide operations, which included the closure of its subsidiary offices and 
direct sales organizations in France and Germany and the elimination of 14 
positions at the Company's headquarters in Beaverton, Oregon as well as the 
resignation of the founder and Chief Technical Officer.  Cash payments during 
the first quarter of 1999 related to these special charges totaled $1,326,000 
and consisted primarily of employee severance benefits and lease termination 
costs.

During the third quarter of 1998, the Company incurred special charges of 
$2,246,000 to relocate its wholly-owned subsidiary, Pryon Corporation, from 
Menomonee Falls, Wisconsin to the Company's Beaverton, Oregon facility in 
order to improve operating efficiencies.  The relocation resulted in a 
reduction of 56 employees from manufacturing, engineering, sales and 
administrative functions.  Cash payments during the first quarter of 1999 
related to these special charges totaled $129,000 and consisted of lease 
termination and other costs.  

As of March 31, 1999, special charges relating primarily to lease and other 
contract terminations of $187,000 were not disbursed.  The Company anticipates 
that these remaining balances will be expended by the end of 1999.

INCOME TAXES

The provision for income taxes has been recorded based on the current estimate 
of the Company's annual effective tax rate.  This rate differs from the 
Federal statutory rate primarily because of the provision for state income 
taxes, utilization of the Company's federal net operating loss carryovers, the 
benefit of the Company's research and experimentation tax credits, the benefit 
of the Company's foreign sales corporation and tax-exempt interest income 
earned on investments. 

<PAGE>8

BASIC AND DILUTED EARNINGS PER SHARE

In accordance with the requirements of Statement of Financial Accounting 
Standards (SFAS) No. 128, "Earnings per Share" both basic earnings per share 
and diluted earnings per share are presented.  Basic earnings per share is 
computed using the weighted average number of common shares outstanding and 
diluted earnings per share is computed using the weighted average number of 
common shares outstanding and dilutive potential common shares assumed to be 
outstanding during the period using the treasury stock method.  Dilutive 
potential common shares consist of options to purchase common stock. 

COMPREHENSIVE INCOME

The following is a reconciliation of net income to comprehensive income:

                                           Three months ended March 31,
(in thousands)                                  1999        1998
-----------------------------------------------------------------------
Net income                                   $   725    $   230

 Other comprehensive income, net of tax
    Foreign currency translation 
     adjustments                                (158)        10
    Unrealized holding loss arising 
     during the period                           (68)        (3)
                                             -------    -------
 Other comprehensive income (loss)              (226)         7
                                             -------    -------

Comprehensive income                         $   499    $   237
                                             =======    =======


CONTINGENCIES

In 1990, the Company entered into a development and supply agreement with 
Gensia, Inc. to develop and supply a closed-loop drug delivery and monitoring 
device ("GenESA device"). This agreement was amended in December 1997.  Gensia 
began shipments of the GenESA device to Europe in 1995 and received FDA 
clearance to market the product in the United States in the third quarter of 
1997.  In April 1998, the Company was informed that Gensia planned no 
additional purchases of the GenESA device under the supply agreement with the 
Company which provided for the purchase of devices through the year 2002.  In 
July 1998, the Company commenced litigation against Gensia Sicor, Inc. and 
Gensia Automedics alleging that they have breached the supply agreement and is 
seeking damages of approximately $10 million.


SEGMENT INFORMATION

In accordance with SFAS 131 "Disclosures about Segments of an Enterprise and 
Related Information" the Company functions as a single operating segment:  
the design, manufacture, sale and servicing of medical instruments and 
systems.  Sales are made primarily to hospitals and other health-care related 
customers.  


<PAGE>9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Sales.  Sales for the first quarter of 1999 decreased 4.2% to $14.3 million 
from $14.9 million for the first quarter of 1998. 

Domestic sales, excluding military revenues and Original Equipment 
Manufacturer ("OEM") sales of Pryon OEM products and GenESA devices, increased 
slightly to $7.8 million (54.2% of total sales) in the first quarter of 1999 
from $7.7 million (51.7% of total sales) in the first quarter of 1998.

U.S. military revenues increased 104.1% to $693,000 (4.8% of total sales) in 
the first quarter of 1999 from $339,000 (2.3% of total sales) in the first 
quarter of 1998.  The Company attributes the increase in its military revenues 
in the first quarter of 1999 to the unpredictable size and timing of military 
patient monitoring equipment procurements.

International sales, excluding international OEM sales of Pryon OEM products 
and GenESA devices, decreased 13.8% to $4.1 million (28.5% of total sales) in 
the first quarter of 1999 from $4.7 million (31.7% of total sales) in the 
first quarter of 1998.  This decrease in international sales was principally 
due to the continued strength of the U.S. dollar against foreign currencies 
and soft international markets, particularly in Europe and Asia, and the 
reorganization of the Company's direct sales organization in Europe.

OEM sales of Pryon OEM products and GenESA devices decreased 17.0% to $1.8 
million (12.4% of total sales) in the first quarter of 1999 from $2.1 million 
(14.3% of total sales) in the first quarter of 1998 primarily due to a 
$496,000 decrease in sales of GenESA devices to Gensia Automedics, Inc.  In 
April 1998, the Company was informed that Gensia planned no additional 
purchases of the GenESA device under a supply agreement with the Company which 
provided for the purchase of devices through the year 2002. In July 1998, the 
Company commenced litigation against Gensia Sicor, Inc. and Gensia Automedics 
alleging that they have breached the supply agreement and seeking damages of 
approximately $10 million.  This decrease was partially offset by an increase 
in sales of Pryon OEM products.

Gross profit.  As a percentage of sales, gross profit increased to 48.6% in 
the first quarter of 1999 from 46.3% in the first quarter of 1998.  The 
increase in gross profit was due primarily to lower manufacturing overhead 
caused by a higher production volume in the first quarter of 1999.  Production 
volume was low during the first quarter of 1998 as finished good inventory 
levels were high at the end of 1997.

Research and development.  Research and development expenses decreased 19.1% 
to $1.5 million in the first quarter of 1999 from $1.9 million in the first 
quarter of 1998. This decrease was primarily the result of the relocation of 
the Pryon operations from Menomonee Falls, Wisconsin to the Company's 
Beaverton, Oregon facility in 1998 which resulted in a reduction in the total 
number of research and development employees.  As a percentage of sales, 
research and development expenses decreased to 10.5% in the first quarter of 
1999 from 12.5% in the first quarter of 1998.

<PAGE>10

Selling, general and administrative.  Selling, general and administrative 
expenses decreased 5.4% to $4.7 million in the first quarter of 1999 from $5.0 
million in the first quarter of 1998.  This decrease resulted primarily from 
the closure of direct sales organizations in Germany and France initiated in 
1998 and the reduction in the number of administrative employees as a result 
of the relocation of the Pryon operations from Wisconsin to Oregon in 1998.  
As a percentage of sales, selling, general and administrative expenses 
decreased to 33.2% in the first quarter of 1999 from 33.6% in the first 
quarter of 1998.

Other income.  Other income decreased 6.3% to $262,000 in the first quarter of 
1999 from $280,000 in the first quarter of 1998 primarily due to a reduction 
in the cash and investments balance as the Company utilized $9.1 million of 
its available cash to repurchase common stock in 1998 and the first quarter of 
1999.

Provision for income taxes.  The provision for income taxes increased to 
$242,000 in the first quarter of 1999 from $89,000 in the first quarter of 
1998 representing effective tax rates of 25.0% and 28.0%, respectively.  The 
effective tax rate, which reflects the estimate of the Company's annual 
effective tax rate, was lower in the first quarter of 1999 than in the first 
quarter of 1998 primarily due to the expected utilization of the Company's net 
operating loss carryover in 1999.

Net income.  Net income in the first quarter of 1999 was $725,000 or $0.09 per 
diluted share compared to net income of $230,000 or $0.03 per diluted share in 
the first quarter of 1998.  The increase in net income is primarily due to 
reduced operating expenses as a result of the relocation of the Pryon 
manufacturing facility and the world-wide restructuring in 1998.

LIQUIDITY AND CAPITAL RESOURCES

The Company maintained its strong financial position as of March 31, 1999 with 
working capital balances of $34.5 million and a current ratio of 6.7:1 as 
compared to working capital of $39.3 million and a current ratio of 5.9:1 at 
December 31, 1998.  Cash flow from operating activities for the first three 
months of 1999 was $5.4 million as compared to $3.2 million for the first 
three months of 1998.  The increase in cash flow from operations was primarily 
due to an increase in collections of accounts receivable.

In January 1998 the Company's Board of Directors adopted a resolution 
authorizing the repurchase of up to 1,000,000 outstanding shares of the 
Company's common stock.  During the first quarter of 1999, the Company 
repurchased 18,000 shares of its common stock, for a total of 974,000 shares 
repurchased under the stock repurchase plan. Management believes that current 
cash and investment balances and future cash flows from operations will be 
sufficient to meet the Company's liquidity and capital needs for the 
foreseeable future. 


<PAGE>11

YEAR 2000 ISSUES

The Company has substantially completed its assessment of its computer 
software programs and operating systems used in its internal operations, 
including applications used in its financial, manufacturing equipment, and 
engineering design tools to determine its readiness for the Year 2000.  The 
inability of computer software programs and operating systems to accurately 
recognize, interpret and process date codes designating the Year 2000 and 
beyond could result in a system failure or miscalculations which could have a 
material impact on the Company's ability to conduct its business. Costs 
incurred by the Company to date in its assessment of internal systems were not 
material.

The Company has completed its assessment of Year 2000 compliance of each of 
its product lines.  All configurations of instruments (instruments include 
Propaq and Propaq Encore monitors and all options) and their component parts 
have been tested and are Year 2000 compliant.  Acuity software versions 
3.15.05 and all Networked Acuity software versions have been tested and are 
Year 2000 compliant.  Acuity software versions prior to 3.15.05 have a minor 
connectivity issue related to the Year 2000 between the Acuity central station 
and the monitors that can be fixed through an upgrade to the Acuity central 
station provided by the Company.  The operation of the Acuity central station 
and the Propaq monitors in the Year 2000 and beyond should not be adversely 
affected by this connectivity issue.

The Company has also contacted most critical suppliers of products and 
services to determine that the suppliers' operations and the products and 
services they provide are Year 2000 compliant.  The Company has received 
responses from approximately 70% of the suppliers contacted, all of which have 
indicated that their products and operations either are, or expect to be, Year 
2000 compliant.   The Company will continue to follow up with suppliers who 
have not yet responded to determine if there are any critical suppliers who 
may not be Year 2000 compliant.

Based on its assessments to date, the Company believes it will not experience 
any material disruption as a result of Year 2000 issues in its computer 
software programs and other systems used in its operations.  However, there 
can be no assurances that unanticipated Year 2000 issues will not have a 
material adverse effect on the Company's business, financial condition or 
results of operations.  Furthermore, there can be no assurance that Year 2000 
issues of certain critical third party suppliers, including those supplying 
electricity, water or telephone service will not experience difficulties 
resulting in the disruption of service or delivery of supplies to the Company, 
which could adversely affect the Company's business, financial condition or 
results of operations.  The Company will develop contingency plans for dealing 
with the most reasonably likely worst case scenario that would occur in the 
event that the Company and critical third parties fail to complete efforts to 
achieve Year 2000 compliance on a timely basis by the end of the third quarter 
of 1999. 

<PAGE>12

FORWARD-LOOKING STATEMENTS

This Quarterly Report contains statements, including the anticipated effects 
of the Year 2000 issue, that are forward-looking statements within the meaning 
of the Securities Litigation Reform Act of 1995.  These statements are based 
on current expectations, estimates and projections about the Company's 
business, management's beliefs and assumptions made by management.  Words such 
as "expects," "anticipates," "intends," "plans," "believes," "seeks," 
"estimates" and variations of such words and similar expressions are intended 
to identify such forward-looking statements.  These statements are not 
guarantees of future performance and involve certain risks, uncertainties and 
assumptions that are difficult to predict. Therefore, actual outcomes and 
results may differ materially from what is expressed or forecasted in such 
forward-looking statements due to numerous factors, including, but not limited 
to factors that could cause unforeseen increases or decreases in the expenses 
expected to be incurred in connection with the operations of the Pryon 
subsidiary in Oregon, the closure of direct sales organizations in France and 
Germany, the timely introduction of new products, the Company's ability to 
identify and remediate Year 2000 issues or the reliability of third party 
assessments and certifications relating to Year 2000 issues.  In addition, 
such statements could be affected by other factors discussed in this Quarterly 
Report and from time to time in the Company's other Securities and Exchange 
Commission filings and reports and by general industry and market conditions 
and growth rates, and general domestic and international economic conditions.

The Company's quarterly operating results have fluctuated in the past and may 
continue to fluctuate in the future depending on factors such as increased 
competition, timing of new product announcements, pricing changes by the 
Company or its competitors, length of sales cycles, market acceptance or 
delays in the introduction of new products or enhanced versions of existing 
products, timing of significant orders, regulatory approval requirements, 
product mix and economic factors and conditions generally and in the market 
for the Company's products specifically.  In particular, the Company's 
quarterly operating results have fluctuated as a result of the unpredictable 
size and timing of military patient monitoring equipment procurements, and 
seasonal or other changes in customer buying patterns.  A substantial portion 
of the Company's revenue in each quarter results from orders booked in that 
quarter.  Accordingly, revenue from quarter to quarter is difficult to 
forecast.  The Company's expense levels are based, in part, on its 
expectations as to future revenue.  If revenue levels are below expectations, 
operating results are likely to be adversely affected.  In particular, net 
income may be disproportionately affected by a reduction in revenue because 
only a small portion of expenses vary with revenue.  Results of operations in 
any period should not be considered indicative of the result to be expected 
for any future period, and fluctuations in operating results may also result 
in fluctuations in the price of the Company's common stock.  No assurance can 
be given that the Company will be able to grow in future periods or that its 
operations will remain profitable.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to the impact of foreign currency fluctuations due to a 
small portion of its international sales.  The Company minimizes its risk to 
foreign currency fluctuations as international sales through independent 
distributors are made in U.S. dollars which has helped reduce any foreign 
currency risk. 
 
<PAGE>13

As of March 31, 1999, the Company had an investment portfolio of fixed income 
securities, including those classified as cash equivalents, short-term 
investments and long-term investments of $18.3 million. These securities are 
subject to interest rate fluctuations. An increase in interest rates could 
adversely affect the market value of the Company's fixed income securities.
 
The Company does not use derivative financial instruments in its investment 
portfolio to manage interest rate risk. The Company does, however, limit its 
exposure to interest rate and credit risk by establishing and strictly 
monitoring clear policies and guidelines for its investment portfolio. The 
weighted average maturity of the investment portfolio may not exceed 360 days 
and no single investment may have a maturity date of greater than two years.  
The guidelines also establish credit quality standards and limit the exposure 
to one issue, issuer, or type of instrument. Due to these factors the exposure 
to market and credit risk is not expected to be material.


<PAGE>14

                          PART II.  OTHER INFORMATION



ITEM 2.  CHANGES IN SECURITIES

During the quarter ended March 31, 1999, the Company sold securities without 
registration under the Securities Act of 1933, as amended (the "Securities 
Act") upon the exercise of certain stock options granted under the Company's 
stock option plans.  An aggregate of 28,412 shares of Common Stock were issued 
at an exercise prices ranging from $1.62 to $6.00.  These transactions were 
effected in reliance upon the exemption from registration under the Securities 
Act provided by Rule 701 promulgated by the Securities and Exchange Commission 
pursuant to authority granted under Section 3 (b) of the Securities Act.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders during the quarter 
ended March 31, 1999.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits: 27.1 Financial Data Schedule
(b)  No reports were filed on Form 8-K during the quarter for which
             this report is filed.

<PAGE>15

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.


                                                   PROTOCOL SYSTEMS, INC.
                                                        (Registrant)


Date: May 14, 1999                                 By  /s/ David F. Bolender
                                                       ---------------------
                                                       David F. Bolender
                                                       Chief Executive
                                                       Officer, President
                                                       and Chairman of the     
                                                       Board of Directors

                                                   By  /s/ Craig M. Swanson
                                                       ---------------------
                                                       Craig M. Swanson
                                                       Vice-President and
                                                       Chief Financial Officer