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 quarterly period ended September 30, 1996
                                
                                
                                
                 Commission File Number 1-13388
                                
                                
                                
                                
                       GUIDANT CORPORATION
     (Exact name of Registrant as specified in its charter)
                                


               INDIANA                           35-1931722
     (State or other jurisdiction of           (I.R.S. Employer
     incorporation or organization)          Identification No.)
                                

                                
                 111 MONUMENT CIRCLE, 29TH FLOOR
                INDIANAPOLIS, INDIANA 46204-5129
            (Address of principal executive offices)
                                
                                
                                
Registrant's telephone number, including area code: (317) 971-2000
                                
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                

                                
Yes  X         No
                                
                                
The number of shares of common stock outstanding as of October 15, 1996:

                Class              Number of Shares Outstanding
               Common                        74,138,005
                                
<PAGE>






                             PART I
                      FINANCIAL INFORMATION

Item 1.  Financial Statements

                   GUIDANT CORPORATION and Subsidiaries
                     Consolidated Statements of Income
                   (In millions, except per-share data)
                              (unaudited)

                                   Three Months Ended    Nine Months Ended
                                       September 30,       September 30,
                                    -----------------    -----------------
                                      1996     1995        1996      1995
                                      ----     ----        ----      ----

Net sales                            $260.1   $234.1     $777.7    $683.0

Cost of sales                          69.1     68.1      246.1     212.5
                                      -----    -----      -----     -----

    Gross profit                      191.0    166.0      531.6     470.5

Research and development               37.6     32.2      110.6     100.0
Sales, marketing and administrative    78.7     72.5      238.4     211.8
                                      -----    -----      -----     -----

                                      116.3    104.7      349.0     311.8
                                      -----    -----      -----     -----

   Income from operations              74.7     61.3      182.6     158.7

Other income (expenses):
   Interest--net                       (5.8)    (7.5)     (19.7)    (22.4)
   Royalties--net                       3.3      1.4        5.7       2.5
   Amortization of goodwill and
      other intangible assets          (4.2)    (5.7)     (16.5)    (16.7)
   Other--net                          (0.1)    (2.2)      (3.6)     (3.2)
   Impairment charges                    --      --       (66.9)       --
                                       -----    -----     ------     -----
                                       (6.8)   (14.0)    (101.0)    (39.8)
                                       -----    -----     ------     -----

Income before income taxes             67.9     47.3       81.6      118.9

Income taxes                           26.7     19.3       58.1       48.6
                                      -----    -----      -----      -----

Net income                            $41.2    $28.0      $23.5      $70.3
                                      =====    =====      =====      =====
Earnings per share                    $0.57    $0.39      $0.33     $ 0.98
                                      =====    =====      =====      =====
Weighted average shares outstanding   72.13    71.86      72.06      71.86

Dividends paid per share             $0.025   $0.025     $0.075     $0.025
                                     ======   ======     ======     ======



See notes to consolidated financial statements.

<PAGE>
                                
              GUIDANT CORPORATION and Subsidiaries
                   Consolidated Balance Sheets
                      (Dollars in millions)


                                             September 30,      December 31,
                                                 1996              1995
                                             ------------       -----------
                                              (unaudited)

ASSETS

Current Assets:
Cash and cash equivalents                        $7.1              $3.4

Accounts receivable, net of allowances
   of $7.6 (1996) and $5.7 (1995)               207.7             181.6

Other receivables                                12.3              18.4

Inventories                                     102.3             124.7

Deferred income taxes                            60.5              46.1

Prepaid expenses                                 21.7              14.8
                                                -----             -----

   Total Current Assets                         411.6             389.0


Other Assets:
Goodwill, net of allowances of $78.2 (1996)
   and $84.7 (1995)                             201.0             263.6

Other intangible assets, net of allowances
   of $7.9 (1996) and $18.9 (1995)               10.0              33.0

Investments                                      37.0              16.4

Sundry                                           18.3              25.3

Deferred income taxes                             1.4              13.7

Property and equipment                          518.6             533.0

Less accumulated depreciation                  (206.2)           (216.6)
                                                -----             -----

   Property and equipment, net                  312.4             316.4
                                                -----             -----
                                               $991.7           $1,057.4
                                                =====            =======

See notes to consolidated financial statements.

<PAGE>


              GUIDANT CORPORATION and Subsidiaries
                   Consolidated Balance Sheets
                      (Dollars in millions)

                                             September 30,      December 31,
                                                1996                1995
                                             ------------       ------------
                                             (unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Accounts payable                                 28.6              45.8

Employee compensation                            63.7              63.3

Restructuring liabilities                        11.8              12.9

Income taxes payable                              1.5              22.0

Other liabilities                                64.8              64.7

Short-term borrowings                           396.9              70.0
                                                -----             -----
   Total Current Liabilities                    567.3             278.7

Noncurrent Liabilities:
Long-term debt                                    --              385.0

Other                                            10.2               9.5
                                                -----             -----
                                                 10.2             394.5

Commitments and contingencies                     --                --

Shareholders' Equity
Common stock-no par value;
   Authorized shares: 250,000,000
   Issued shares: 72,159,000 (1996)             192.5             192.5
                  71,961,000 (1995)

Additional paid-in capital                      151.1             146.8

Retained earnings                               121.5             103.4

Currency translation adjustments                (8.3)             (1.2)

Deferred cost, ESOP                            (52.8)            (57.3)

Net unrealized appreciation on investments       10.2               --
                                                -----             -----

                                                414.2             384.2
                                                -----             -----

                                               $991.7          $1,057.4
                                                =====           =======


See notes to consolidated financial statements.

<PAGE>


              GUIDANT CORPORATION and Subsidiaries
              Consolidated Statements of Cash Flow
                          (In millions)

                                                   Nine Months Ended
                                                      September 30,
                                                    ----------------
                                                    1996        1995
                                                    ----        ----
                                                      (unaudited)
Cash Provided by Operating Activities:
  Net income                                       $23.5       $70.3

Adjustments to Reconcile Net Income to Cash
 Provided by Operating Activities:
  Depreciation                                      32.6        32.8
  Amortization of goodwill
      and other intangibles                         16.5        16.6
  Provision for inventory and related losses        40.2        13.0
  Impairment charges                                66.9          --
  Other noncash expenses                             1.2        15.3
                                                   -----        -----
                                                   180.9        148.0

Changes in Operating Assets and Liabilities:
  Receivables, increase                            (23.0)      (11.0)
  Inventories, increase                             (8.6)      (17.8)
  Prepaid expenses, (increase) decrease             (6.8)        1.1
  Accounts payable and accrued
    liabilities, decrease                          (16.8)      (33.0)
  Income taxes payable, decrease                   (20.5)       (0.1)
  Other liabilities, decrease                       (0.4)      (35.9)
                                                    -----       -----
Net Cash Provided by Operating Activities           104.8       51.3

(Used for) Provided by Investing Activities:
  Additions of property and equipment, net         (42.1)      (46.3)
  Acquisitions                                       --        (10.8)
  (Additions) reductions to other assets, net        3.9        (6.6)
                                                    -----       -----
Net Cash Used for Investing Activities             (38.2)      (63.7)

(Used for) Provided by Financing Activities:
  Reductions of short-term borrowings              (58.1)      (78.0)
  Reductions of long-term borrowings                 --        (15.0)
  Capital contribution from Lilly                    --         11.1
  Dividends                                         (5.4)       (1.8)
                                                    -----       -----
Net Cash Used for Financing Activities             (63.5)      (83.7)

Effect of Exchange Rate Changes on Cash              0.6        (2.7)
                                                    -----       -----
Net Increase (Decrease) in Cash 
   and Cash Equivalents                              3.7        (98.8)

Cash and Cash Equivalents at Beginning of Period     3.4        113.0
                                                   -----        -----

Cash and Cash Equivalents at End of Period          $7.1        $14.2
                                                   =====        =====

See notes to consolidated financial statements.

<PAGE>


              GUIDANT CORPORATION and Subsidiaries
           Notes to Consolidated Financial Statements
                          (In millions)
                           (unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes necessary for a fair presentation of results of
operations, financial position, and cash flows in conformity with
generally accepted accounting principles.  In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included.  For further information, refer to the consolidated
financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December
31, 1995.


NOTE 2 - INVENTORIES

Inventories consisted of the following:

                                  September 30,      December 31,
                                      1996               1995
                                 -------------       -----------
     
     Finished products                $58.2             $45.8
     Work in process                   23.5              43.9
     Raw materials and supplies        20.6              35.0
                                      -----             -----
                                     $102.3            $124.7
                                      =====             =====


NOTE 3 - IMPAIRED ASSET AND OBSOLESCENCE CHARGES

The Company took two separate noncash charges totaling $95.7
million during the second quarter of 1996.  The first was an
impaired asset charge against the Company's atherectomy-related
goodwill and other intangible assets of $66.9 million.  This
impairment loss was based on an analysis performed in accordance
with Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of.  SFAS No. 121 requires certain
long-lived assets, which meet prescribed impairment tests, be
written down to their fair values.  The goodwill and other
intangible assets were recorded as part of the purchase of
Devices for Vascular Intervention, Inc. by Eli Lilly and Company
in 1989, prior to the formation of Guidant Corporation.

The second charge was a $28.8 million noncash charge to cost of
sales resulting from the obsolescence of older generation cardiac
rhythm management products and programmers.  The charge resulted
from accelerated regulatory approval for market release and
customer acceptance of new products.  The after-tax impact on
earnings of these charges was $84.1 million.


<PAGE>


              GUIDANT CORPORATION and Subsidiaries
           Notes to Consolidated Financial Statements
                          (In millions)
                           (unaudited)

NOTE 4 - INVESTMENTS

Marketable equity securities are classified as available-for-sale
in accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities.  Available-for-sale
securities are carried at fair value, with unrealized gains and
losses, net of tax reported in a separate component of
shareholders' equity.


NOTE 5 - CONTINGENCIES

The Company is a party to various legal actions which have
occurred in the normal course of business.  In May 1995,
Intermedics, Inc., a division of Sulzermedica USA, Inc., filed
suit against Guidant alleging patent infringement related to
certain Guidant defibrillator and pacemaker models.  Intermedics
is seeking injunctive and monetary relief of an unspecified
amount.

The Company has also been named as a defendant, along with
Schneider (USA), Inc. and Schneider (Europe), AG, wholly owned
subsidiaries of Pfizer, Inc., in an action brought in 1995 by
Boston Scientific Corporation and its subsidiary, SCIMED Life
Systems, Inc.  The lawsuit alleges violation of federal and state
antitrust laws, as well as state unfair competition and abuse of
process laws.  Boston Scientific and SCIMED allege that the
violations are based on the misuse of the United States patent
laws as a result of agreements concerning certain rapid exchange
catheter patents.  The lawsuit seeks injunctive relief,
unspecified monetary damages and a declaration that certain
patents are unenforceable.

In August 1995, the Company received a letter from Pacesetter,
Inc. ("Pacesetter") advising the Company that Pacesetter believes
that certain Pacesetter patents are being used by the Company in
connection with the Company's VIGOR pacemaker/programmer
combination.  The Pacesetter letter and a subsequent letter also
advise that it appears to Pacesetter that the Company may also be
using certain patents licensed to Pacesetter in connection with
the Company's VENTAK MINI.  On May 3, 1996, Pacesetter filed suit
against the Company in the United States District Court for the
District of Delaware.  The lawsuit was subsequently transferred
to the United States District Court for Minnesota.  The
complaint, as subsequently amended, alleges infringement of six
of the patents referred to in the previous letters and seeks
injunctive relief, unspecified monetary damages and an award of
attorneys' fees.

On August 23, 1996, following the filing with the French Ministry
of Labor and Social Affairs of a small number of reported
incidents concerning the use in France of the 15mm ACS RX MULTI-
LINK Coronary Stent System, the Company in cooperation with the
French Ministry voluntarily suspended sales of this product and
recalled units in France.



<PAGE>


              GUIDANT CORPORATION and Subsidiaries
           Notes to Consolidated Financial Statements
                          (In millions)
                           (unaudited)


NOTE 5 - CONTINGENCIES (Continued)

The Company is a party to certain other legal actions arising in
the ordinary course of its business.  While it is not possible to
predict or determine the outcome of the legal actions brought
against it, the Company believes the costs associated with all of
these actions will not have a material adverse effect on its
consolidated financial position or liquidity, but could possibly
be material to the consolidated results of operations in any one
accounting period.

Further, product liability claims may be asserted in the future
relative to events currently unknown to management.  Management
believes that the Company's risk management practices, including
insurance coverage, are reasonably adequate to protect against
potential product liability losses.



<PAGE>



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


Guidant Corporation (Guidant or the Company), an Indiana
corporation, was created after the Board of Directors of Eli
Lilly and Company (Lilly) approved a plan under which Lilly
transferred to Guidant its ownership interests in five
businesses.  Guidant was incorporated in September 1994, and
consummated an initial public offering of its common stock in
December 1994.  Upon completion of the initial public offering,
Lilly's beneficial ownership of Guidant's common stock was
reduced to approximately 80%.  Lilly disposed of its remaining
ownership interest in Guidant in September 1995, by means of a
split-off, an exchange offer pursuant to which Lilly shareholders
were given the opportunity to exchange some or all of their Lilly
common shares for shares of Guidant common stock on a tax-free
basis.  The consummation of the exchange offer resulted in Lilly
distributing all of its Guidant common stock to Lilly
shareholders.  As a result, Lilly no longer owns any of the
Company's common stock.

Guidant is a multinational company that designs, develops,
manufactures and markets a broad range of products for use in:
(i) cardiac rhythm management (CRM); (ii) vascular intervention,
and (iii) other forms of minimally invasive surgery (MIS).

<PAGE>


The following tables are summaries of the Company's net sales and 
major costs and expenses:
                                   Three Months Ended     Nine Months Ended
                                       September 30,        September 30,
                                   ------------------     -----------------
                                      1996     1995        1996       1995
                                      ----     ----        ----       ----
                                                ($ in millions)
                                                  (unaudited)

Net sales:
  CRM                                $144.7   $119.3     $422.7    $328.8
  Vascular intervention               104.7    108.4      320.7     333.4
  MIS                                  10.7      6.4       34.3      20.8
                                     ------    -----      -----     -----

          Total net sales            $260.1   $234.1     $777.7    $683.0

Cost of sales                          69.1     68.1      246.1(1)  212.5
                                     ------    -----     ------     -----

          Gross profit                191.0    166.0      531.6     470.5

Research and development               37.6     32.2      110.6     100.0

Sales, marketing and administrative    78.7     72.5      238.4     211.8
                                      ------   -----      -----     -----

  Income from operations              $74.7    $61.3     $182.6    $158.7
                                     ======    ======    ======    ======



                                            As a Percent of Net Sales
                                     --------------------------------------
                                     Three Months Ended   Nine Months Ended
                                         September 30,      September 30,
                                     ------------------   -----------------
                                      1996       1995       1996      1995
                                      ----       ----       ----      ----

Net sales:
  CRM                                  55.6%    51.0%      54.4%     48.1%
  Vascular intervention                40.3     46.3       41.2      48.8
  MIS                                   4.1      2.7        4.4       3.1
                                      ------   ------     ------    ------
          Total net sales             100.0%   100.0%     100.0%    100.0%

Cost of sales                          26.6     29.1       31.6(1)   31.1
                                      -----    -----      -----     -----

          Gross profit                 73.4     70.9       68.4      68.9

Research and development               14.4     13.7       14.2      14.7

Sales, marketing and administrative    30.3     31.0       30.7      31.0
                                      -----    -----      -----     -----

  Income from operations               28.7%    26.2%      23.5%     23.2%
                                     =======   ======     ======    ======

(1) Includes the impact of $28.8 million in special noncash
    obsolescence charges in the second quarter of 1996 resulting
    from the accelerated regulatory approval for market release
    and customer acceptance of new generation CRM products and
    programmers.



<PAGE>


Operating Results -- Three and Nine Months Ended September 30, 1996

The Company had worldwide net sales of $260.1 million for the
three months ended September 30, 1996, reflecting an increase of
$26.0 million or 11% over the same period in 1995.  Growth in
unit volume of 14% increased worldwide net sales, while sale
prices and fluctuations in foreign currency exchange rates
decreased net sales 1% and 2%, respectively.

The Company had worldwide net sales of $777.7 million for the
nine months ended September 30, 1996, an increase of $94.7
million or 14% over the nine months ended September 30, 1995.
This growth in worldwide net sales was due to unit volume growth
of 12% and sales price increases of 3%, offset somewhat by
foreign currency exchange rate changes which decreased net sales
1% during this period.

Net sales of CRM products grew $25.4 million or 21.3% for the
three months ended September 30, 1996 as compared to the same
period in 1995.  CRM product net sales grew $93.9 million or
28.6% for the nine months ended September 30, 1996 as compared to
the nine months ended September 30, 1995.  This growth was led by
strong worldwide sales of the VENTAK MINI II advanced, tiered-
therapy automatic implantable cardioverter-defibrillators (AICD)
released in the United States in July 1996, the VENTAK MINI HC
released in the United States in May 1996, and the VENTAK MINI
released in the United States in January 1996.  The
technologically advanced VENTAK MINI II, one of the world's
smallest full-featured AICD, along with the VENTAK MINI HC,
incorporates the Company's exclusive TRIAD defibrillation energy
delivery system which is designed to simplify the device implant
procedure and reduce the energy needed for defibrillation.  The
Company's adaptive-rate pacemaker products also contributed to
sales growth during the period, led by the VIGOR DR and VIGOR SR
which were released to the United States market in June 1995.



<PAGE>

Net sales of vascular intervention products for the three months
ended September 30, 1996 decreased $3.7 million or 3.4% from the
same period in 1995.  For the nine months ended September 30,
1996, net sales of vascular intervention products decreased $12.7
million or 3.8% from the comparable period in 1995.  The Company
experienced sales growth in angioplasty systems, primarily due
to: (i) the ACS MULTI-LINK Coronary Stent system, launched in
Europe and other international markets in November 1995, (ii)
increased sales of over-the-wire catheters such as the ACS
CONCORDE and the high pressure ACS ENDURA, which were market
released in March 1996, (iii) the ACS Tx2000 (over-the-wire
catheter) and ACS RX COMET (rapid exchange catheter) released to
international markets in June 1996, and (iv) continued growth in
guidewires and accessory products. This growth was offset by
sales declines in atherectomy and dilatation catheters, and lower
net average selling prices of most dilatation catheters in the
United States.  These lower net average selling prices of
dilatation catheters include the impact of product mix changes
due to the recently launched over-the-wire catheters discussed
above.  The Company believes that net average selling prices may
continue to decline due to this shift in product mix.
Atherectomy sales declines were primarily due to increasing usage
of coronary stents, a competing alternative therapy.  Management
believes that atherectomy products will continue to experience
sales declines in 1996 compared to 1995.

Net sales of MIS products for the three months ended September
30, 1996 were $10.7 million, an increase of $4.3 million or 67.2%
over the same period in the previous year.  MIS net sales for the
nine months ended September 30, 1996 were $34.3 million, an
increase of 64.9% over the comparable period in 1995.
MIS sales grew in both United States and international
markets as the Company continued to expand the marketing
of its innovative laparoscopic technologies.  Sales growth
was primarily driven by the ORIGIN TACKER endoscopic
fixation device and custom procedural kits which incorporate
these devices and other MIS products.

Sales growth occurred in both the United States and international
markets. United States net sales increased 3.2% to $158.5 million
and international net sales increased 26.2% to $101.6 million for
the three months ended September 30, 1996 as compared to the same
period in 1995. United States net sales growth was primarily due
to CRM sales of the VENTAK MINI II, VENTAK MINI HC, VIGOR DR, and

<PAGE>



VIGOR SR.  International net sales growth was primarily
driven by the ACS MULTI-LINK Coronary Stent System, European
and Japanese sales of the VIGOR family of pacemakers and
European sales of the VENTAK MINI II and VENTAK MINI HC.  The
VIGOR family of pacemakers, which includes conventional and
adaptive-rate pacemaker products, represents a majority of the
Company's bradycardia revenues in the United States, Europe, and
Japan.  The commencement of new distribution arrangements in
Italy and the Benelux countries, guidewires and the recently
introduced ACS RX COMET in Europe and ACS Tx2000 in Japan also
contributed to the international sales growth.  Guidewire sales
in Europe and Japan also contributed to the international sales
growth. For the nine months ended September 30, 1996, United
States net sales increased 7.1% to $483.4 million and
international net sales increased 27.0% to $294.3 million, as
compared to the nine months ended September 30, 1995.

Cost of sales was $69.1 million for the three months ended
September 30, 1996, an increase of $1.0 million or 1.5% from the
comparable period in 1995.  Cost of sales as a percentage of net
sales for the three months ended September 30, 1996 was 26.6% as
compared to 29.1% for the same period in 1995. This reduction in
cost of sales as a percentage of net sales resulted from enhanced
manufacturing efficiencies, and reduced manufacturing costs of
newer generation CRM and VI products.  For the nine months ended
September 30, 1996 and 1995, cost of sales was $246.1 million or
31.6% of net sales and $212.5 million or 31.1% of net sales,
respectively.  Cost of sales without the effect of the special
obsolescence charges taken in the second quarter of 1996, would
have been $217.3 million or 27.9% of net sales.

The Company has continued investing significant resources in
research and development to develop new innovative products.
Research and development expenses of $37.6 million for the three
months ended September 30, 1996 increased $5.4 million or 16.8%
compared to the same period in 1995.  For the nine months ended
September 30, 1996, research and development expenses increased
$10.6 million or 10.6% and decreased as a percentage of net sales
to 14.2% from 14.7% for the same period last year.  Increased
research and

<PAGE>


development spending during these periods primarily resulted from
new product development costs related to: (i) the clinical
evaluation of implantable device systems for the treatment of
congestive heart failure, (ii) the development of future
generations of pacemaker products, (iii) the development of the
VENTAK AV AICD system, which had its first implants in Europe in
September 1996, and (iv) the United States clinical evaluation of
the ACS MULTI-LINK Coronary Stent.  The VENTAK AV is the first
system to incorporate ATRIAL VIEW, a unique rhythm discrimination
capability, along with dual-chamber pacemaker and advanced
defibrillation therapies.

Sales, marketing and administrative expenses grew $6.2 million or
8.6% for the three months ended September 30, 1996 compared to
the same period in the prior year.  These expenses represented
approximately 30.3% of net sales in 1996 and 31.0% of net sales
in 1995.  For the nine months ended September 30, 1996, sales,
marketing and administrative expenses increased 12.6% in
comparison to the same period in 1995.  Variable CRM selling
expenses associated with the United States market release of
VENTAK MINI II were among the primary reasons for this increased
spending during the period.  The commencement of new distribution
arrangements in Italy and the Benelux countries in the last half
of 1995 also contributed to the increase in sales and marketing
expenses.

Income from operations of $74.7 million for the three months
ended September 30, 1996, represented a 21.9% increase from the
comparable period in 1995. Increased net sales combined with
lower costs of sales due to manufacturing efficiencies and a
lower rate of growth in sales, marketing, and administrative
expenses resulted in this growth in income from operations.
Income from operations for the nine months ended September 30,
1996 of $182.6 million represented a 15.1% increase from the same
period last year and was negatively affected by the previously
reported special obsolescence charges on CRM inventory and
programmers taken during the second quarter of 1996.  Income from
operations, without considering these noncash charges in 1996,
would have increased 33.2% for the nine months ended September
30, 1996, over the same period in 1995.


<PAGE>

For the three months ended September, 1996, the Company had net
other expenses of $6.8 million compared to $14.0 million for the
same period in the prior year.  The decrease in net other
expenses was primarily due to the following:  (i) increased net
royalty income due to royalties received on certain vascular
intervention technology patents, (ii) reduced interest expense
due to the decline in outstanding borrowings from the prior year,
and (iii) reduced amortization expense resulting from the
previously reported special impairment charges taken by the
Company against its atherectomy-related goodwill and other
intangible assets.  The Company had net other expenses of $101.0
million and $39.8 million for the nine months ended September 30,
1996 and 1995, respectively.  Included in net other expenses for
the nine months ended September 30, 1996 were the aforementioned
special impairment charges of $66.9 million.

The Company's effective income tax rate, without considering the
effect of the special obsolescence and impairment charges
discussed above, was 39.3% for the three and nine months ended
September 30, 1996, respectively, compared to 40.8% and 40.9%
respectively, for each of the same periods in 1995.  The lower
effective income tax rate resulted from the reduced impact of
nondeductible goodwill amortization, reduced state income taxes,
and increased tax benefits from the Company's operations in
Puerto Rico.

Net income for the three months ended September 30, 1996 was
$41.2 million, an increase of $13.2 million or 47.1% from the
three months ended September 30, 1995.  This growth in net income
resulted from operating income growth of 21.9% along with reduced
other expenses and the lower effective income tax rate.  For the
nine months ended September 30, 1996 net income was $23.5
million, a decrease of $46.8 million or 66.5% from the comparable
period in the prior year.  Without the noncash impairment and
obsolescence charges totaling $95.7 million recorded in the
second quarter of 1996, net income would have been $107.6
million, and earnings per share would have been $1.49 for the
nine months ended September 30, 1996.

<PAGE>

Liquidity and Financial Condition

The Company generated cash flows which were sufficient to fund
operations.  For the nine months ended September 30, 1996, cash
provided by operating activities was $104.8 million compared to
$51.3 million for the same period in 1995.  This increase of
$53.5 million resulted from: (i) higher operating income without
the effect of the noncash special obsolescence and impairment
charges, (ii) reduced payments on restructuring liabilities in
1996, (iii) payments to Lilly of $39.5 million in 1995 to settle
outstanding payables pursuant to the split-off, and (iv)
controlled growth in inventories.

Net cash used for investing activities totaled $38.2 million for
the nine months ended September 30, 1996, compared to $63.7
million for the same period in 1995.  The most significant use of
cash for investing activities in 1996 related to net additions of
property and equipment of $42.1 million.  Cash used in investing
declined in part due to the payment of approximately $10.8
million to complete certain distributor acquisitions during the
nine months ended September 30, 1995.

Net cash used for financing activities totaled $63.5 million for
the nine months ended September 30, 1996, compared to $83.7
million for the same period in 1995.  The Company's reduction of
its short-term borrowings and payment of dividends comprise the
cash used for financing activities during 1996.  Payments of its
loans payable to Lilly of $78.0 million and payments on its long-
term borrowing of $15.0 million were the Company's most
significant use of cash for financing activities during the nine
months ended September 30, 1995.

At September 30, 1996, the Company had outstanding borrowings of
$396.9 million, down from $455.0 million at December 31, 1995,
through the issuance of commercial paper and bank borrowings at a
year-to-date weighted average interest rate of 5.92%.  The
commercial paper borrowings are supported by a credit facility
which permits borrowings up to $600.0 million through January 8,
2001.  This credit facility, under which there are currently no
outstanding borrowings, carries a variable market rate of interest.
These borrowings are classified as a current liability, and as a
result current liabilities exceed current assets by $155.7 million
at September 30, 1996.


<PAGE>

In September 1996, the Company received a favorable ruling from
the Internal Revenue Service (IRS) which allows the Company to
issue stock to support its previously announced acquisition
strategy without affecting the ruling issued by the IRS in
November 1994 as to the tax-free nature of the Company's split-
off from Lilly.  However, the Company recently announced the
cancellation of its planned secondary offering of its common
stock.  The Company does not believe the cancellation of this
planned secondary offering will have a significant impact on its
acquisition strategy.

The Company expects its cash from operations to be adequate to
meet its obligations to make interest payments on its debt and
other anticipated cash needs including capital expenditures which
are expected to be approximately $60.0 million in 1996.

The Company has recognized net deferred tax assets aggregating
$61.9 million at September 30, 1996 and $59.8 million at December
31, 1995.  The assets relate principally to the establishment of
inventory and product related reserves, the acquisition of
certain intangible assets, and charges associated with the 1993
restructuring.  In view of the consistent profitability of its
past operations, the Company believes that all these assets will
be substantially recovered and that no significant additional
valuation allowances are necessary.




<PAGE>
                                
                                
                             Part II
                        OTHER INFORMATION


Item 1.   Legal Proceedings.

     See the Company's quarterly report filed on Form 10-Q for
the quarterly period ended June 30, 1996.


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

     (b)  Reports on Form 8-K.  During the quarter for which this
Report on Form 10-Q is filed, the Registrant filed no Report on
Form 8-K.


                                
                                
<PAGE>
                                
                                
                                
                           SIGNATURES

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


                              GUIDANT CORPORATION
                              (Registrant)




Date:  November 4, 1996            /s/Keith E. Brauer
                              -----------------------------------
                              Keith E. Brauer
                              Vice President, Finance and
                              Chief Financial Officer






Date:  November 4, 1996            /s/Roger Marchetti
                              -----------------------------------
                              Roger Marchetti
                              Chief Accounting Officer

                                
                                
                                
                                
                                
                                
                                
                                
                                
<PAGE>