SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549

                              FORM 10-Q

(Mark one)

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998

     OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES 
EXCHANGE ACT OF 1934 
For the transition period from _________ to __________


                         Commission File No. 1-13521


                             HYPERCOM CORPORATION
                (Exact Name of Registrant as Specified in Its Charter)

          DELAWARE                          86-0828608
      (State or Other Jurisdiction     (IRS Employer Identification No.)
      of Incorporation or Organization)


2851 WEST KATHLEEN ROAD, PHOENIX, ARIZONA      85053
(Address of Principal Executive Offices)     (Zip Code)

                              (602) 504-5000
                         (Registrant's telephone number)

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 past 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[ ]

Number of shares of the registrant's common stock, $.001 par value per 
share, outstanding as of November 10, 1998 was 32,960,925.



Table of Contents

PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements

(a)     Consolidated balance sheets...................................3
         as of September 30, 1998 and June 30, 1998

(b)     Consolidated statements of income.............................5
         for the three months ended September 30, 1998
         and 1997

(c)      Consolidated statements of cash flow.........................6
         for the three months ended September 30, 1998 and 1997

(d)     Notes to consolidated financial statements....................7

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

Item 3     Quantitative and Qualitative Discussions About Market 
            Risk.....................................................21

PART II     OTHER INFORMATION

Item 1.          Legal Proceedings...................................22

Item 2.          Changes in Securities and use of Proceeds.......... 22

Item 5.          Other Events....................................... 22

Item 6.          Exhibits and Reports on Form 8K.....................23

          27.1   Financial Data Schedule ......................... ..24

          99.1   Press Release.......................................25



PART I -- FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS
                              HYPERCOM CORPORATION
                             Consolidated Balance Sheets
                           (Unaudited and in thousands)
<TABLE>
<CAPTION>
                                           September 30, 1998     June 30, 1998
ASSETS
   Current Assets                    
<S>                                             <C>               <C>
     Cash and cash equivalents                  $  35,681          $  55,659          
     Marketable Securities, at market              43,204             42,641
        Accounts receivable     
     (net of allowance for doubtful 
       accounts of $4,720 and $3,729)              56,970             43,989     
     Inventories                                   59,406             60,539     
     Deferred income taxes                         11,948             10,991
     Prepaid taxes                                  3,573              2,893     
     Prepaid expenses and                           9,776              7,173     
     other current assets                        --------          ---------
       Total current assets                     $ 220,558          $ 223,885

     Property, plant and equipment, net         $  24,508          $  23,570
     Advances to related parties                      218                258
     Long-term investments                         14,407              9,931
     Other assets                                   1,703              1,933
                                                ---------          ---------
          Total assets                          $ 261,394          $ 259,577
                                                =========          =========

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities:
     Accounts payable                                 15,331             17,134     
     Accrued liabilities                           15,667             16,537     
     Deferred revenue                               1,227                608     
     Income taxes payable                           4,738              2,209     
     Current portion of 
      long term obligations                           607                598     
                                                ---------          ---------
        Total current liabilities               $  37,570          $  37,086
     
     Deferred income taxes                      $   1,776          $     861
     Long term obligations                          1,239              1,199     
                                                ---------          ---------
     Total liabilities                          $  40,585          $  39,146
     
  Stockholders' equity                    
     Common stock                               $      12          $      13
     Additional paid-in capital                   145,601            145,601
     Treasury Stock                                (5,376)                 -     
     Receivables from stockholders                 (1,498)            (1,498)     
     Retained earnings                             82,070             76,315
                                                ---------          ---------     
       Total stockholders' equity               $ 220,809          $ 220,431
                                                ---------          ---------
Total liabilities and 
stockholders' equity                            $ 261,394          $ 259,577     
                                                =========          =========
</TABLE>
The accompanying notes are an integral part of these financial statements

                          HYPERCOM CORPORATION
                     Consolidated Statements of Income
            (Unaudited and in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                       Three Months Ended     Three Months Ended
                                        September 30, 1998     September 30, 1997
<S>                                   <C>                  <C>     
Net revenue                              $ 65,983          $ 78,937
Costs and expenses:                              
  Cost of revenue                          32,628            40,831
  Research and development                  7,632             4,519
  Selling, general and administrative      18,399            17,119
  Noncash compensation                          -             1,770
                                         --------          --------
Total costs and expenses                 $ 58,659          $ 64,239
                                         --------          --------
Income from operations                   $  7,324          $ 14,698

Interest and other income                   1,445               228
Interest expense                             (181)             (560)
Interest and other expense, related party       -               122
Equity in related party                         -              (134)
Foreign currency gain (loss)                 (248)             (339)       
                                          --------          --------
Income before income taxes               $  8,340          $ 14,015
          
Income taxes                               (2,585)           (4,905)
                                          --------          --------
Net income                               $  5,755          $  9,110
                                        =========          =========
Earnings per share:
     Basic Shares Outstanding               33,229          25,000

     Basic Earnings per Share               $ 0.17          $ 0.36
     
     Diluted Shares Outstanding             34,412          26,194

     Diluted Earnings per Share             $ 0.17          $ 0.35     
     
</TABLE>
The accompanying notes are an integral part of these financial statements


                           HYPERCOM CORPORATION
                     Consolidated Statements of Cash Flow
                             (Unaudited and in thousands)
                
<TABLE>
<CAPTION>     
                                           Three Months Ended      Three Months Ended
                                           September 30, 1998      September 30, 1997

Cash flow from operating activities:
<S>                                                   <C>               <C>
   Cash received from customers                       $  52,574           $ 59,836     
    Interest received                                     1,453                 99
    Other income received                                     -                115      
    Cash paid to suppliers & consultants                (59,207)           (59,796)
    Interest paid                                          (181)              (573)     
    Income taxes paid                                    (2,206)               (87)
                                                      ---------            --------     
      Net cash used in operating activities              (7,567)              (406)     

Cash flow from investing activities:
   Advances to related parties                                -               (253)
   Repayments from related parties                           40                  -
   Acquisition of other assets                                -                 13
   Proceeds from disposal of property,                      484                118
   plant & equipment      
   Purchase of property, plant & equipment               (2,568)            (2,522)
   Purchase of long-term investments                     (4,476)                 -
   Purchase of marketable securities                       (563)                 -
                                                      ---------            ---------
     Net cash used in investing activities               (7,083)            (2,644)

Cash flow from financing activities:
   Proceeds of bank notes payable                        22,478             34,906
   and other debt instruments
   Repayment of bank notes payable                     (22,433)            (34,927)
   and other debt instruments 
   Proceeds from sale of common stock                      159                   -
   Stock offering costs                                      -                (480)
   Repurchase of common stock                           (5,376)                  -
     Net cash used in financing                        --------            --------     
     activities                                         (5,172)               (501)
      

Effect of exchange rate changes                           (156)               (288)
Net decrease in cash                                   (19,978)             (3,839)
Cash & equivalents, beginning of period                 55,659              16,318
                                                      -------             --------     
Cash & equivalents, end of period                     $ 35,681            $ 12,479
                                                     =========           =========

</TABLE>
The accompanying notes are an integral part of these financial statements





                Notes to Consolidated Financial Statements
          (Unaudited and in thousands, except per share amounts)

NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited, consolidated financial 
statements do not include all the information that usually 
accompanies complete financial statements. These reflect all 
normal recurring adjustments necessary for a fair 
presentation of the financial condition and results of 
operations for the interim periods covered. These results 
do not necessarily indicate the results expected for the 
year ending June 30, 1999.

This financial information is intended to be read in 
conjunction with the Company's audited financial statements 
and footnotes thereto included in the Company's Annual 
Report on Form 10-K for the year ended June 30, 1998.

NOTE 2 - INVENTORIES
Inventories, stated at the lower of cost on a first-in, 
first-out basis or market value, consisted of the following 
amounts:

                         September 30, 1998     June 30, 1998
<TABLE>
<S>                              <C>                   <C>
Purchased parts                  $19,144               $18,710     
         
Work in process                   12,440                11,388     
             
Finished goods                    27,822                30,441
                                 -------               -------     
            
                                 $59,406               $60,539
</TABLE>

NOTE 3 - EARNINGS PER SHARE (EPS) DISCLOSURES:
Hypercom has adopted the provisions of Statement of 
Financial Accounting Standards No. 128, Earnings Per Share 
(SFAS 128), and the Securities and Exchange Commission Staff 
Accounting Bulletin 98 (SAB 98) effective December 31, 1997. 
SFAS 128 requires the presentation of basic and diluted 
earnings per share.  Basic EPS is computed by dividing 
income available to common stockholders by the weighted 
average number of common shares outstanding for the period. 
Diluted EPS is computed giving effect to all dilutive 
potential common shares that were outstanding during the 
period. Dilutive potential common shares consist of the 
incremental common shares issuable upon the exercise of 
stock options. SAB 98 requires certain stock issued in 
conjunction with an initial public offering for nominal 
consideration to be included in basic EPS calculations as if 
it were outstanding for all periods presented. Additionally, 
certain stock and potential common stock issued for nominal 
considerations are required to be included in diluted EPS 
calculations as if they were outstanding for all periods. 
SAB 98 does not affect the Company's EPS calculations. All 
prior period earnings per share amounts have been restated 
to comply with the SFAS 128.

In accordance with the disclosure requirements of SFAS 128, 
a reconciliation of the numerator and denominator of basic 
and diluted EPS is provided below. 

          (Unaudited and in thousands, except per share amounts) 
<TABLE>
<CAPTION>
                              Three Months Ended     Three Months Ended
                              September 30, 1998     September 30, 1997     
Numerator - Basic and Diluted EPS:
<S>                                  <C>                   <C>     
     Net income                      $  5,755              $ 9,110

     Common stock outstanding          33,229               25,000
     
Basic earnings per share                 0.17                 0.36           
                                       ======               ======     
Denominator - Diluted EPS:

     Denominator - Basic EPS          33,229                25,000
Effect of Dilutive Securities     
     Common stock options              1,183                 1,194                 
                                      ------                ------
     
Diluted shares outstanding            34,412                26,194     
                                      ------                ------
     
Diluted earnings per share              0.17                  0.35
                                      ======                ======     
</TABLE>

NOTE 4 - SEGMENT INFORMATION
Hypercom has two reportable segments: Point-of-Sale (POS) 
Systems and Network Systems. POS Systems develops, 
manufactures, markets, and supports products that automate 
electronic payment transactions at the point of sale in 
merchant establishments. 

Network Systems develops, manufactures, markets, and 
supports enterprise-networking systems. These systems 
interconnect and consolidate the following through wide-area 
networks into a single networked system:
* Geographically dispersed legacy data,
* Local-area networks and
* Voice, fax, and video traffic. 

Hypercom's reportable segments are strategic business units 
that offer different products and services. They are managed 
separately because each requires different technologies and 
marketing strategies.

The following table presents certain segment financial 
information unaudited and in thousands for the three-month 
periods that ended September 30, 1998, and September 30, 
1997:
<TABLE>
<CAPTION>
                                                      Three months ended 9/30/98                
                                                      POS           Network          
                                                      Systems       Systems     Total
<S>                                                 <C>            <C>         <C>          
Revenue from external customers                     $ 56,921       $ 9,062     $ 65,983
Intersegment revenues                                  1,149         1,203        2,352
                                                    --------       -------     --------
     Total revenues                                   58,070        10,2         68,335      
                                                    ========       =======     ========       
Segment income from operations                      $ 12,876       $   120     $ 12,996
                                                    ========       =======     ========      
Segment assets                                      $305,962       $28,202     $334,164
                                                    ========       =======     ======== 
</TABLE>

<TABLE>
<CAPTION>
                                                      Three months ended 9/30/97                
                                                      POS            Network               
                                                      Systems        Systems    Total     
<S>                                                   <C>            <C>       <C>
Revenue from external customers                       $ 70,130       $ 8,807   $ 78,937          
Intersegment revenues                                        -         5,643      5,643
                                                      --------       -------   --------
     Total revenues                                     70,130         14,450    84,580     
                                                      ========       =======   ========    
Segment income from operations                        $ 15,689       $ 1,628   $ 17,318
                                                      ========       =======   ========    
Segment assets                                        $262,707       $42,113   $304,820
                                                      ========       =======   ======== 
                                                  
</TABLE>
Reconciliation
<TABLE>
<CAPTION>
                                                     Three months      Three months     
                                                     ended 9/30/98     ended 9/30/97
Net Revenues
<S>                                                   <C>                <C>
Net revenue for reportable segments                   $ 68,335           $ 84,580
 
Elimination of intersegment revenue                     (2,352)            (5,643)
                                                       --------            -------
Total consolidated revenue                            $ 65,983           $ 79,937
                                                       ========          ========

Income from Operations

Income from operations for reportable segments        $ 12,996           $ 17,318
     
     Elimination of intersegment profit                   (285)            (1,410)           
Unallocated amounts
     Corporate expenses
     (Including translation gains/losses)               (5,387)            (1,210)
                                                       --------          --------
          Consolidated income from operations          $ 7,324           $ 14,698
                                                       ========          ========
</TABLE>

NOTE 5 - SUBSEQUENT EVENTS

On November 3, 1998 Hypercom purchased substantially all the assets of 
The Horizon Group, Inc. (Horizon). Horizon is a national distributor 
of equipment for Hypercom and other POS equipment manufacturers. In 
addition to sales of new equipment, the company provides a variety of 
services, including refurbishing equipment, help desk, PIN pad key 
loading, terminal deployment and other custom programs. The acquisition 
will allow Hypercom to meet the needs of a segment of its customer base 
that requires direct-from-manufacturer terminal services.

The acquisition will be accounted for under the purchase method of 
accounting.  The results of Horizon's operations will be included in 
Hypercom's consolidated statements of Income and Cash Flows beginning 
with the date of acquisition. 

Horizon was acquired for $5 million in cash and $.5 million in Hypercom 
common stock. The agreement provides for additional payments up to $7 
million, based on Horizon's earnings over the three-year period 
subsequent to the acquisition date.  The additional payments are to be 
in the form of Hypercom common stock. The intangible assets arising from 
this transaction will be amortized over periods ranging from five to 
twenty years.

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

This analysis of financial condition should be read in conjunction 
with the unaudited, condensed financial statements above and the 
related disclosures included elsewhere herein and "Management's 
Discussion and Analysis of Financial Condition and Results of 
Operations" included as part of the Company's Annual Report on 
Form 10-K for the year ended June 30, 1998.


Results of Operations

Net Revenue 

Net revenues for the three-months that ended September 30, 1998, 
decreased by 16.4% (from $78.9 million to $65.9 million) compared 
to the period that ended September 30, 1997. The decline was 
mainly due to unusually high revenue last year caused by a one-
time event that delayed $6.0 million in POS shipments from the 
fourth quarter of fiscal year 1998 to the first quarter of fiscal 
1998. The Asian economic crisis also caused a 44%, $7.2 million, 
decline in POS revenues for that region. 


Cost of Revenue 

Hypercom's cost of revenue includes the cost of raw materials, 
manufacturing labor, overhead, and subcontracted manufacturing 
costs. The cost of revenue decreased by $8.2 million from $40.8 
million to $32.6 million for the three months that ended September 
30, 1998 compared to the same quarter in the prior year. Cost of 
revenue as a percentage of revenue decreased slightly from 51.7% 
for the three months ended September 30, 1997, to 49.4% for the 
three months ended September 30, 1998. Improved manufacturing 
productivity caused lower labor and overhead costs per unit and 
the decline in the cost of revenue.


Research and Development Expense

Research and development expenses consist mainly of software and 
hardware engineering costs and the cost of development personnel. 
Research and development expense increased by $3.1 million, to 
$7.6 million in the first quarter of fiscal 1999 compared to $4.5 
million in the same quarter of fiscal 1998. This increase was a 
result of higher development costs for new POS payment system 
products including the Ascendant Server Environment. 

To date, all Hypercom software development costs have been 
expensed as incurred and included in research and development. The 
product development process establishes technological feasibility 
when a working model is complete. Costs incurred between that time 
and the point at which the product is ready for the initial 
shipment have not been significant.


Selling, General, and Administrative Expense 

Sales and marketing expenses, administrative personnel costs, and 
facilities operation make up the selling, general, and 
administrative expenses. These expenses totaled $18.4 million for 
the first quarter of fiscal year 1998, up by $1.3 million from a 
year ago but substantially lower than the fourth quarter of fiscal 
1998. The $1.3 million increase included a $1.2 million increase 
in POS sales and marketing expense, a $1.1 million increase in 
administrative expense and a $1.0 million decrease in Network 
Systems expenses. As a percentage of revenues, these expenses 
increased from 21.7% of revenues in the first quarter of fiscal 
1998 to 27.9% for the first quarter in fiscal 1999; primarily due 
to lower revenues in the 1999 quarter.


Income from Operations 

Income from operations decreased by $7.4 million from $14.7 
million in the three months that ended September 30, 1997, to $7.3 
million for the three months that ended September 30, 1998. As a 
percentage of revenue, income from operations was 18.6% in the 
three months that ended September 30, 1997 compared to 11.1% for 
the three months that ended September 30, 1998. The majority of 
this decrease was due to the lower revenue level this year with 
the remainder of the decrease due to higher operating expense 
levels. 


Net Interest and Other Income 

Interest income consisted primarily of returns on short-term 
investments and cash balances. During the quarter ending September 
30, 1998, income of $1.4 million was generated compared to $.2 
million in the period ending September 30, 1997. Interest expense 
decreased by nearly $.4 million to only $.2 million compared to 
$.6 million the previous year. 
This change was primarily due to decreased short-term borrowing 
and higher cash balances generated by the Company's initial public 
offering of common stock in November 1997.


Income Taxes 

The provisions for Federal, State and foreign taxes were $2.6 
million and $4.9 million in the three months ended September 30, 
1998 and 1997, respectively.  The effective tax rates were 31.0% 
and 35.0% for these periods. The Company's tax rate is typically 
lower than the US federal statutory rate due to the following: 
* Research and experimentation tax credits in Australia and the 
US,
* Sales in foreign jurisdictions with lower tax rates and
* The use of foreign sales corporations offering lower taxes on 
certain international sales.


Liquidity and Capital Resources

Hypercom requires working capital to support inventory, maintain 
accounts receivable balances and fund capital expenditures needed 
to support its' operations and net growth. 

As of September 30, 1998, the Company's working capital was 
$183.0 million, which included cash, cash equivalents, and short-
term investments of $78.9 million. The Company funds working 
capital requirements with cash from operations and short-term 
borrowing when necessary. Net cash used in operating activities 
was $0.4 million for the three months that ended September 30, 
1997, and $7.6 million for the same period in 1998. 

Hypercom's capital commitments primarily consist of the purchase 
or lease of facilities and equipment. The Company used $2.6 
million in the three months that ended September 30, 1998 to 
purchase fixed assets. 

The main items acquired were manufacturing equipment, facilities, 
computer hardware and software to support growth.

Hypercom maintains a $10.0 million revolving line of credit 
secured by accounts receivable and inventories. This line expires 
in December 1999. Under the terms of the agreement, the Company 
can borrow amounts up to the following:
* 80.0% of domestic accounts receivable less than 90 days past due 
and
* 35.0% of its raw material and finished goods inventories.
There was no outstanding balance as of September 30, 1998.  
 
The Company believes that its current net capital position 
combined with the cash generated by operations and available 
borrowings are sufficient to fund operations for the foreseeable 
future.


Year 2000 Issues

The Company's internal Information Systems department has been 
conducting an analysis of the systems used within the Company, 
from desktop software to the software used within the PBX system.  
There have been a few software applications identified that are 
not capable of making the transition from the year 1999 to year 
2000.  In some cases, upgrading the software has already been 
initiated.  In those cases where there is no feasibility of 
upgrading the software, alternative systems have been analyzed, 
with a transition program already under review.  The Company does 
not believe that cost of making the transition to different 
applications, nor the cost of upgrading the existing applications, 
will be significant and material.  Because of the additional 
functionality that can be obtained by making such transition, it 
is believed that cost saving incurred by the increased 
productivity and ability to generate internal reports will exceed 
the actual costs expended.

The Company does develop and distributes computer hardware and 
software, and has thoroughly reviewed such systems.  Because of 
the interaction between the Company's hardware/software with other 
manufacturer's hardware/software, the Company refrains from 
warranting Year 2000 compliance. In order to make the Company's 
POS terminal customers aware of potential issues with the 
transition from 1999 to 2000, the Company has, at its own expense, 
provided over ten thousand test cards to enable the Company's 
customers to fully test the ability of the Company's products, 
when interacting with other vendors software/hardware, to 
ascertain whether or not a Year 2000 compliance issue is present.  
The Company's IEN/NAC products do not utilize an internal "clock", 
and there are no Year 2000 compliance issues with such products.   
Workstation software products may have a Year 2000 compliance 
issue because of the operating system and database program 
utilized by the Company's customers, but not because of the 
applications developed and distributed by the Company.

Nevertheless, the Company makes no warranty regarding Year 2000 
compliance and believes it is the customer's ultimate 
responsibility to verify whether or not there is a Year 2000 
compliance issue, and the Company expressly disclaims any warranty 
or representation made in the foregoing regarding the Company's 
products, and provides this information in compliance with 
published guidance of the Securities and Exchange Commission.


Backlog

As of September 30, 1998, the Company had increased backlog by 
$14.6 million or 19% since the previous quarter end.  September 
30, 1998 backlog was $92.2 million compared to $77.6 million at 
June 30, 1998.  Backlog includes all revenue specified in signed 
contracts and purchase orders expected to be realized within one 
year. The Company cannot be sure that the contracts included in 
backlog will actually generate the specified revenues within the 
subsequent calendar year.    


Seasonality

Historically, the Company's net revenue and results of operations 
are stronger in the first half of the fiscal year due to the 
following factors:
* Increased purchases of POS payment systems for the holiday 
season,
* Incentive programs VISA and MasterCard offer from July to 
  December to encourage merchants to offer card-based payment 
  systems and
* Allocation of customers' capital budgets occurring by 
  the end of March with volume shipments beginning in July. 
The seasonal impact is expected to be less in the next two quarters 
due to expected high demand for new POS terminal products being 
released by the Company.


Special Note Concerning Forward-Looking Statements

The Quarterly Report on Form 10-Q contains forward-looking statements.
 
Hypercom may include additional written or oral forward-looking 
statements in filings with the Securities and Exchange Commission, 
press releases, and elsewhere. The words "believe", "expect", 
"anticipate", "intend", "forecast", "project", and similar 
expressions identify these statements. They may relate to any of 
the following:
* Acceptance of new products,
* Projections of revenues,
* Income or loss,
* Capital expenditures,
* Plans for future operations,
* Growth and acquisitions,
* Financing needs or plans,
* Availability of financing,
* Plans relating to Company services and
* Anticipated outcome of litigation.
 
Forward-looking statements are within the meaning of the term in 
Section 27A of the Securities Act of 1933, as amended, and Section 
21E of the Securities Exchange Act of 1934, as amended.

Forward-looking statements reflect the Company's current views 
regarding future events and financial performance. Such statements 
apply only as of the date they are made. They are subject to risks 
and uncertainties, some of which cannot be predicted or measured. 
Future events and actual results may differ greatly from those 
predicted in forward-looking statements. 

Statements in this Quarterly Report describe factors that could 
cause such differences. In addition, new factors emerge that are 
impossible for management to predict. The impact of each factor or 
combination of factors on the business causes actual results to 
differ greatly from those predicted in forward-looking statements. 
The Company accepts no obligation to publicly update or review any 
forward-looking statements as a result of new information or 
future events. 


Factors That May Affect Future Operating Results and Financial 
Condition.

The Company's future operating results and financial condition is 
dependent on a number of factors that the Company must successfully 
manage in order to achieve favorable future operating results and 
financial condition. The following potential risks and uncertainties, 
together with those mentioned elsewhere herein, could affect the 
Company's future operating results, financial condition, and the 
market price of its Common Stock.

 
Difficulty in Forecasting Net Revenue

Hypercom's net revenue in any period is difficult to forecast. 
Some of the factors affecting net revenue include the timing of 
product purchases and the length of the sales cycle for the 
Company's products. 

Hypercom POS Systems and its customers enter into purchase 
agreements that generally have a one-year term and minimum 
purchase commitments. However, customers are not required to make 
purchases at any particular times during the term of the agreement 
or to purchase products exclusively from Hypercom. Because the timing
of product purchases in any given period is at the customers' exclusive 
discretion and control, net revenue for POS products is difficult to 
forecast. 

It is also difficult to forecast net revenue in certain 
international markets where large orders for complete systems 
occur more frequently than in the U.S. Due to the significant cost 
of buying complete systems, their sales cycle is long and 
difficult to predict. 

Hypercom Network Systems operates with little backlog and, as a 
result, net revenue in any quarter is substantially dependent on 
the orders booked and shipped in that quarter. The highly 
technical nature of these sales generally results in a sales cycle 
that ranges from 12 to 18 months.

Hypercom's operating results are subject to other uncertainties, 
including the following:
* Industry and economic conditions;
* Competitive pressures;
* Type, timing, and size of orders and shipments for major 
  customers;
* Variations in product mix and cost;
* Overhead costs;
* Obsolescence of inventory;
* Manufacturing or production difficulties and
* Nonrecurring charges.

Significant Fluctuations in Quarterly Results

Hypercom's operating results vary from quarter to quarter. If 
sales and shipments in any quarter do not meet expectations, the 
results may be adversely affected. Any unexpected decline in the 
growth of the net revenue without a quick reduction in the growth 
of operating expenses could have a serious negative effect on 
operating results and financial condition. Hypercom cannot be sure 
that it will meet profitability objectives for a quarter if sales 
fall or the gross margin is reduced. 

Seasonality

Hypercom continues to experience some degree of seasonality. For 
this reason, net revenue and results of operations are stronger in 
the first half of the fiscal year reflecting:
* Increased POS purchases to satisfy increased retail demand 
  during the holiday season,
* Incentive programs VISA and MasterCard offer from July to 
  December to encourage merchants to offer card-based payment 
  systems and  
* Allocation of customers' capital budgets by the end of March 
  with volume shipments beginning in July.

 
Risks Associated with International Operations and Foreign 
Currency Fluctuations

Hypercom's net revenue from international sales for fiscal years 
1996, 1997 and 1998 was approximately 58%, 56% and 57%, 
respectively, of the Company's net revenue. Hypercom expects that 
international sales will continue to account for a significant 
percentage of its net revenue in the foreseeable future. 
Accordingly, the Company is subject to risks associated with 
international operations. Examples of these risks include:
* Management of a multinational organization,
* Fluctuations in currency exchange rates,
* Compliance with local laws,
* Regulatory and product certification requirements,   
* Changes in international laws and requirements,
* Tariffs and other trade barriers,
* Import and export controls,
* Restrictions on the repatriation of funds,
* Inflationary conditions,
* Staffing, employment, and severance issues,
* Political instability and economic downturns, which include the 
  impact of revenue generated from the Company's shipments into 
  Asia,
* War or other hostilities,
* Expropriation or nationalization of assets,
* Overlap of tax structures,
* Renegotiations or nullification of contracts and
* Longer payment cycles.

In some countries these risks and other factors that relate to 
doing business abroad may have negative effects on the Company. 
Hypercom takes steps such as hedging to partially offset changes 
in currency exchange rates. However, there is no assurance that 
such strategies enable the Company to avoid losses due to changes 
in the exchange rate. In addition, the inability to effectively 
manage these and other risks could have a serious negative effect 
on Hypercom's business or financial condition.

The Company generally does not engage in hedging transactions that 
could partially offset the effects of fluctuations in currency 
exchange rates.  However, as the Company continues to expand its 
international operations, exposure to gains and losses on foreign 
currency transactions may increase.  The Company may choose to 
limit such exposure by entering into forward foreign exchange 
contracts or engaging in similar hedging strategies.  There can be 
no assurance that any currency exchange strategy would be 
successful in avoiding exchange related losses or that the failure 
to manage currency risks will not have a material adverse effect 
on the Company's business, operating results or financial 
condition.


Uncertainty of Profitability for Hypercom Network Systems
 
The Company established Hypercom Network Systems in 1994 to 
continue to develop enterprise networking products and 
technologies for the electronic payments industry and to leverage 
these technologies to address other enterprise networking 
opportunities.  Since its formation, Hypercom Network Systems has 
expended substantial sums on research and development and on 
establishing distinct manufacturing operations and distribution 
channels. Hypercom Network Systems has recently incurred losses as 
a standalone business, and there can be no assurance that it will 
return to profitability, particularly in light of the competitive 
nature of the industry in which it operates. 
 

Industry and Technological Changes; Dependence on Development and 
Market Acceptance of New Products

Hypercom believes that in the next few years the following factors 
will create major changes in the POS industry:
* Lower-cost products, 
* Greater functionality at the point of sale,
* Faster and more accurate transaction processing,  
* Improvements in security features and
* Emerging technologies and payment programs.

In addition, the enterprise networking industry is characterized 
by rapid changes in technology and numerous new product 
introductions.  Hypercom's success, particularly in the enterprise 
networking industry, will depend to a large degree upon its 
continued ability to offer new products and enhancements to its 
existing products to meet changing market and industry requirements. 
New products and technologies may have an effect on the sales of 
existing products and technologies. There can be no assurance that 
the introduction of new products and technologies will not have a 
material adverse affect on the Company's business and financial 
condition.
 
Developing new products and technologies is a complex, uncertain 
process requiring innovation and accurate anticipation of 
technological and market trends. The Company cannot provide 
complete assurance of its ability to successfully:
* Identify, develop, or manufacture new products and technologies,  
* Market or support these new products and technologies, 
* Control delays in introducing new products,
* Gain market acceptance for the new products and technologies,
* Respond to technological changes and new industry standards and
* Respond to competitors' announcements of new products.

The inability to respond effectively to any of these challenges 
may have a negative impact on Hypercom's business and financial 
success. Hypercom may suffer other business and financial losses if 
it is successful in marketing new products and responding to 
competitive and industry changes. When changes to the product line 
are announced, the Company will be challenged to:
* Manage possible shortened life cycles for existing products,
* Continue to sell existing products and
* Prevent customers from returning existing products.

 
Dependence on Current Management and Key Personnel

George Wallner, Albert A. Irato, Paul Wallner, and Jairo Gonzalez 
are instrumental in Hypercom's development, growth, and 
operations. The Company has employment agreements with Mr. Irato 
and Mr. Gonzalez. However it does not have employment agreements 
with George Wallner, Paul Wallner, or any other member of senior 
management. Although the Company has no plans to enter into 
employment agreements with other executive officers or key 
employees, the Company may review the value of such employment 
agreements in the future. 

Hypercom is the beneficiary of key-man life insurance of $1.0 
million on both George Wallner and Paul Wallner. The loss of any 
of the key executives of Hypercom could have a negative effect on 
Hypercom's business and financial condition.
 
Hypercom's continued growth and operations also depend on the 
continued service of other key employees and the hiring of 
qualified new employees. Competition for highly skilled business, 
technical, marketing, and other staff is intense. Competition is 
particularly fierce given the current strong economy for high-
technology companies. In addition, competing for skilled employees 
may result in increased compensation costs. If Hypercom is not 
successful in retaining and hiring qualified staff, negative 
effects on its business and financial condition may result.   

 
Excess or Obsolete Inventory

Managing Hypercom's inventory of components and finished products 
is a complex task. The Company must avoid maintaining excess 
inventory as a result of: 
* The need to inventory of components that are in limited supply,
* Buying components in bulk for the best pricing,
* Responding to the unpredictable demand for products,
* Responding to customer requests for quick delivery schedules and
* Storing products made obsolete by new product offerings.

If the Company accumulates excess or obsolete inventory, price 
reductions and inventory write-downs may result. Such a situation 
could adversely affect the Company's business and financial 
condition.


Competition

Hypercom is active in very competitive markets. Among the main 
competitive factors are the following:
* Product quality
* Reliability
* Performance
* Functionality
* Pricing
* Certification
* Upgradeability

Hypercom's main competition in the electronic payment industry is 
VeriFone, Inc.  Hewlett-Packard Company acquired VeriFone, Inc. in 
1997. In enterprise networking, competitors include Cisco Systems, 
Inc., 3Com Corporation, and Motorola Information Systems Group. 
Some competitors have significantly greater financial and 
technical resources, better name recognition, and a larger 
customer base than Hypercom.  

Hypercom faces additional competitive challenges in foreign 
countries. These factors include the following:
* Preferences for national vendors,
* Difficulties in obtaining necessary certifications and 
* Difficulties in meeting the requirements of government policies

These competitive challenges may result in price discounts or 
other concessions and in sales lost to competitors. As a result, 
Hypercom's business and financial condition could suffer. In 
addition, the Company cannot be certain of its ability to compete 
successfully in the future.

 
Dependence on Certain Suppliers and Third-Party Distributors

Hypercom contracts with an independent manufacturer to build 
networking products. It is also dependent on sole-source suppliers 
for microprocessors, some integrated circuits, and other 
electronic components. Other components are available from only a 
limited number of sources. Hypercom has generally been able to 
obtain adequate supplies of these products. However, in the future 
if the Company could not secure enough products or develop 
alternate sources, product introductions or shipments could be 
delayed. Significant delays could have a serious negative effect 
on Hypercom's business and financial condition. 

The Company markets and distributes its products to end-users 
through third-party distributors. Third-party distributors are a 
prime channel for distribution in some international markets. In 
the U.S. they are becoming more important, especially for the 
enterprise networking products. Therefore, the ability to market 
and distribute products depends significantly on Hypercom's 
relationship with third-party distributors.  

The performance and financial condition of distributors could have 
a negative impact on the Company's business and financial 
condition if:
* Hypercom's relationships with them were to deteriorate,
* They could not perform as expected or pay the Company or
* Local laws prevented Hypercom from using distributors that 
  perform poorly.

 
Reliance on Certain Hypercom POS Systems Customers

Many Hypercom POS Systems sales result from large purchases by a 
few large organizations. Although no one customer accounted for 
more than 10% of the Company's net revenue in fiscal 1998, the two 
largest customers accounted for 17.9% of the net that year. The 
five largest accounted for 28.9% of net revenue. 

The Company typically enters into one-year purchase agreements 
with its larger customers. These agreements generally provide for 
minimum purchase commitments and do not require the customers to 
buy POS products from Hypercom exclusively.  

Serious negative impacts could result if any of the larger POS 
customers delayed or stopped buying from Hypercom. The Company 
expects to continue to rely on a limited number of customers in 
any given period for a significant part of its net revenue.  

Further, customer demand can be adversely affected by many factors 
including the following:
* Budgetary constraints,
* Changes in the customer's competitive environment,
* Customer involvement in mergers or other strategic alignments,
* Price increases by Hypercom or its competitors,
* Personnel changes,
* The number, timing, and significance of new and enhanced 
  products, 
* The ability of Hypercom to market new and enhanced products and
* General economic factors.  

Hypercom cannot be assured that its important customers will 
continue to buy its products at historical or any particular 
level.

 
Impact of Industry Regulation and Standards

Before sales are completed in the United States, Hypercom's 
products must: 
* Meet industry standards as imposed by VISA, MasterCard, and 
  others,
* Be certified to connect to some public telecommunications 
  networks, 
* Comply with Federal Communications Commission (FCC) regulations 
  and 
* Comply with Underwriters Laboratories regulations.

Similarly, before completing sales in foreign countries, 
Hypercom's products must comply with:
* Local telecommunications standards, 
* Recommendations of quasi-regulatory authorities and
* Recommendations of standards-setting committees.

In addition, public carriers require that equipment connected to 
their networks comply with their own standards. These standards in 
part reflect their currently installed equipment. Some public 
carriers have equipment that does not fully meet current industry 
standards. Hypercom must address this issue in designing 
enterprise-networking products.  

Although Hypercom believes its products currently meet all 
applicable industry standards, it has no assurance that its 
products will comply with future standards. Negative impacts to 
Hypercom's business and financial condition could result in the 
future if the Company cannot: 
* Obtain needed regulatory approvals or certifications, 
* Retain domestic or foreign approvals or certifications and 
* Meet new industry standards.

In addition, carriers set the tariffs that govern rates for public 
telecommunications services, including their features and 
capacity.  These services are subject to regulatory approval. 
Changes in the tariffs could have a serious negative effect on 
Hypercom's business and financial condition. 
 
Hypercom must comply with state, federal, and international laws 
governing such areas as: 
* Occupational health and safety,
* Minimum wages,
* Work hours and overtime,
* Retirement and profit-sharing plans and severance payments and
* The use, storage, handling, and disposal of dangerous chemicals. 

Failure to comply with requirements could impose additional costs 
on the Company. Such failure could also require Hypercom stop some 
activities or otherwise have a serious negative effect on 
Hypercom's business and financial condition.

 
Product Defects

Hypercom offers very complex products. When they are first 
introduced or released in new versions, they may contain software 
or hardware defects that are difficult to detect and correct. Even 
though the Company and customers test all these products, it is 
likely that such errors will continue to be identified after 
products are shipped. 

When they are detected, correcting these defects can be a time-
consuming or impossible task. Software errors may take several 
months to correct, and hardware errors may take even longer. The 
existence of defects and delays in correcting them could result in 
negative consequences including:
* Delays in shipping products,
* Loss of market acceptance for Hypercom products,
* Additional warranty expenses,
* Diversion of resources from product development and
* Loss of credibility with distributors and customers.
 
Because Hypercom's POS products are used to process payment 
transactions, the security features of the such products are 
important. In general, these products are designed to comply 
with industry practices relating to transaction security. Failure 
of the security features could adversely affect the marketing of 
Hypercom products. Any violation of its product warranties 
resulting from security breaches could result in claims 
against the Company.

 
Dependence on Proprietary Technology

Hypercom seeks to establish and protect the proprietary aspects of 
its products by relying on patent, copyright, trademark, and trade 
secret laws. It also relies on confidentiality, licensing, and 
other contractual arrangements, all of which may provide only 
limited protection. Although the Company tries to protect its 
proprietary rights, unauthorized third parties may able to copy 
some portions of or to reverse engineer products to obtain 
technology that the Company regards as proprietary. 
 
In addition, the laws of certain countries do not protect 
Hypercom's proprietary rights to the same extent as U.S. laws. 
Accordingly, the Company may not be able to protect its 
proprietary technology against unauthorized copying or use, which 
could adversely affect the Company's competitive position. 
Hypercom has applied for patents and trademarks that may not be 
granted. If they are granted, the patents may not cover all claims 
the Company is trying to protect.  Further, a challenge could find 
any Company patent or trademark invalid and unenforceable.
 
Hypercom products and technologies incorporate some subject matter 
it believes is in the public domain or otherwise within the rights 
of the Company to use. Such products and technologies include some 
designed and provided by third parties. These third parties could 
assert patent or other intellectual property infringement claims 
against Hypercom with respect to its products and technologies.  

From time to time, third parties claim that Hypercom's products 
infringe their proprietary rights. The Company may experience 
similar claims in the future. Regardless of its merit, any claim 
can be time-consuming, result in costly litigation, and require 
the Company to enter into royalty and licensing agreements. The 
terms of these agreements may not be acceptable to the Company. If 
a claim against Hypercom is successful and the Company fails to 
develop or license a substitute technology quickly, it could be 
adversely affected.

 
Risks of Potential Acquisitions

In addition to the acquisition of The Horizon Group, Inc. 
("Horizon"), the Company may acquire or make substantial 
investments in related businesses, technologies, or products in 
the future. Any acquisition or investment would entail various 
risks including the following: 
* The difficulty of assimilating the technologies, operations and 
  personnel of the acquired business, technology or product, 
* The potential disruption of the Company's ongoing business and
* The possible inability of the Company to obtain the desired 
  financial and strategic benefits from the acquisition or 
  investment.

These factors could have a serious negative effect on the 
Company's business and financial condition.  Future acquisitions 
and investments could also result in the following:
* Substantial cash expenditures,
* Potentially dilutive issuance of equity securities,
* The incurring of additional debt and contingent liabilities and
* Amortization expenses related to goodwill and other intangible 
  assets that could adversely affect the Company's business, 
  operating results, and financial condition. 
 
The acquisition of the assets and business of Horizon after the 
fiscal quarter end has consumed and will continue to consume 
substantial management attention and resources of the Company, and 
will require substantial efforts and entail certain risks in the 
integration of its operations.  There can be no assurance that 
anticipated cost savings or synergies will be achieved.  The 
Company will be dependent on the retention and performance of 
Horizon's existing management and employees for the day-to-day 
management and future operation results of the business.


Voting Control by Existing Stockholders

George Wallner and Paul Wallner together own 63.4% of Hypercom's 
outstanding Common Stock following the completion of the Offering 
if the underwriters do not exercise their over-allotment option. 
Accordingly, the Wallners have the ability to control the affairs 
of the Company, including the election of all directors to the 
Company's Board of Directors. They can also, except as otherwise 
provided by law, approve or disapprove other matters submitted to 
a vote of the Company's stockholders, including a merger, 
consolidation, or sale of assets. This voting control also may 
have the effect of delaying or preventing a change in control of 
the Company and may affect the price investors are willing to pay 
in the future for shares of Hypercom's Common Stock.


Potential Volatility of Stock Price

In recent years, the stock market has experienced extreme price 
changes. The market price of the Company's Common Stock has been 
and may continue to be affected by various factors such as the 
following:
* Quarterly variations in the Company's operating results,
* Changes in revenue growth rates for specific geographic areas,  
  business units, products, or the Company as a whole,
* Earnings estimates or changes in estimates by market analysts,
* Speculation in the press or analyst community,
* Announcement of new or enhanced products by the Company or its 
  competitors and 
* General market conditions or market conditions specific to  
  particular industries.


Anti-takeover Effect of Certain Charter and Bylaw Provisions and 
Delaware Law

The Company has provisions in its Amended and Restated Certificate 
of Incorporation and Amended and Restated Bylaws, which:
* Make it more difficult for a third party to take control of the 
  Company,
* Discourage a third party from attempting to take control of the 
  Company or
* Limit the price some investors are willing to pay for shares of 
  the Company's Common Stock,
* Enable the Company to issue Preferred Stock without a vote or 
  other stockholder action, 
* Provide for a classified Board of Directors and regulate 
  nominations for the Board of Directors,
* Make it more difficult for stockholders to take certain 
  corporate actions and
* Delay or prevent a change in control of the Company. 

In addition, certain provisions of Delaware law applicable to the 
Company could also delay a merger, tender offer, or proxy contest 
or make one more difficult. 


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCUSSIONS ABOUT MARKET RISK

The Company is exposed to financial market risks, including 
changes in interest rates and foreign currency exchange rates. 
Nevertheless, the fair value of the Company's investment portfolio 
or related income would not be significantly impacted by either a 
100 basis point increase or decrease in interest rates, due 
primarily to the short-term nature of the major portion of the 
Company's investment portfolio.

A substantial portion of the Company's revenue and capital 
spending is transacted in U.S. dollars. However, the Company does 
at times enter into these transactions in other currencies, such 
as the Hong Kong dollar, Australian dollar, Brazilian Real and 
other Asian and European currencies. Although no hedging 
transactions were entered into during the first fiscal quarter of 
this year, the Company has established revenue and balance sheet 
hedging programs to protect against reductions in value and cash 
flow volatility caused by changes in foreign exchange rates. Such 
programs are intended to reduce market risks, but do not always 
eliminate the impact of foreign currency exchange volatility.

The Company does not purchase or hold any such derivative 
financial instruments for the purpose of speculation or arbitrage. 
See information/discussion appearing in subcaption "Risks 
Associated with International Operations and Foreign Currency 
Fluctuations" of Management's Discussion and Analysis of Financial 
Condition and Results of Operation in Item 2.


PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

On September 23, 1998, an employee of the Company filed a lawsuit 
in the Maricopa County Superior Court against a senior executive 
of the Company and the Company alleging sexual misconduct by the 
executive and is seeking damages, including punitive damages.  The 
employee has also filed a claim with the Equal Employment 
Opportunity Commission (EEOC). Subsequent to the filing of the 
lawsuit, the employee changed counsel and new counsel has, orally, 
threatened to file a shareholder's derivative lawsuit, presumably 
arising out of the same alleged misconduct. The lawsuit that is 
currently on file stems out of alleged misconduct for which the 
employee has already released the Company and the senior 
executive.  The employee is alleging, among other things, that the 
release is invalid.  Based upon a variety of factors, the release 
previously executed by the employee and the Company's evaluation 
of the merits of the claims against it, the Company believes that 
the lawsuit will not have a material adverse effect on its 
financial condition.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

The Company purchased 587,700 shares of Common Stock on the open 
market during the quarter that ended September 30, 1998. These 
purchases were made to increase the Company's treasury stock to 
meet future obligations under the Company's stock purchase and 
stock option plans when employees buy stock and exercise stock 
options.


ITEM 5. OTHER EVENTS

On November 3, 1998, and pursuant to an Agreement of Purchase and 
Sale of Assets dated as of October 1, 1998 (the "Purchase 
Agreement"), by and among Hypercom Corporation ("the Company"), 
The Horizon Group, Inc. ("Horizon"), Kenneth Boody and Beverly 
Boody, the Company acquired substantially all of the assets and 
business of Horizon.  Horizon's business will be operated by the 
Company as an independent subsidiary with sales, distribution and 
support operations based in St. Louis, Missouri. 

Horizon is a national distributor of equipment from Hypercom and 
other POS equipment manufacturers.  In addition to sales of new 
equipment, Horizon provides a variety of services, including 
refurbishing equipment, help desk, PIN pad key loading, terminal 
deployment, and other custom programs. 

On November 3, 1998, the Company issued a press release relating 
to the completion of the acquisition. A copy of the press release 
is filed herewith as Exhibit 99.1 and is hereby incorporated 
herein by reference.


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit Number      Description of Exhibit
     27.1          Financial Data Schedule
     99.1          Press Release

(b) Reports on Form 8-K

None.

SIGNATURES

As required by the Securities Exchange Act of 1934, the following 
authorized officials sign this report on behalf of Hypercom:

HYPERCOM CORPORATION


Date:  November 9, 1998          By: /s/Albert A. Irato
                                     __________________
                                        Albert A. Irato
                                        Chief Executive Officer

Date: November 9, 1998          By: /s/Thomas E. Linnen
                                     __________________
                                       Thomas E. Linnen
                                       Chief Financial Officer


EXHIBIT INDEX

Exhibit No.                                Description

------------                               -----------
27.1                           Financial Data Schedule
99.1                                     Press Release