FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


               QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


For Quarter Ended September 30, 1998

Commission File No. 1-5562 

                              KOLLMORGEN CORPORATION               
             (Exact name of registrant as specified in its charter) 

          New York                                        04-2151861     
(State or other jurisdiction of                      (I.R.S. Employer
 incorporation or organization)                      Identification No.)


1601 Trapelo Road, Waltham, Massachusetts                   02451   
(Address of principal executive offices)                 (Zip Code)


Registrant's telephone number, including area code:   (781)  890-5655


                                                                   
(Former name, former address and former fiscal year, if changed since 
last report.)  


 Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.  

                                               Yes   X       No _____


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

           Class                         Outstanding at November 11, 1998
Common Stock, $2.50 par value                      10,120,785 shares



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                   KOLLMORGEN CORPORATION AND SUBSIDIARIES


                           INDEX



                                                             Page No.


PART I - Financial Information

 Unaudited Condensed Consolidated Statements                3-4 
     of Operations for the Three Months and 
     Nine Months Ended September 30, 1998 and 1997 

 Unaudited Condensed Consolidated Balance              5 
     Sheets as of September 30, 1998  and
     December 31, 1997

 Unaudited Condensed Consolidated Statements                6-7 
     of Cash Flows for the Nine Months Ended 
     September 30, 1998 and 1997 

 Notes to Unaudited Condensed Consolidated             8-11 
     Financial Statements     

 Management's Discussion and Analysis of Financial          11-16
     Condition and Results of Operations



PART II - Other Information                            16



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<TABLE>
                             PART I - FINANCIAL INFORMATION

                       KOLLMORGEN CORPORATION AND SUBSIDIARIES
                   Condensed Consolidated Statements of Operations
                    (Dollars in thousands, except per share amounts)
                                     (Unaudited)
<CAPTION>
                                           For the                 For the
                                           Three Months Ended              Nine Months Ended   
                                               September 30,                September 30,
                                             --------------------          -------------------
                                           1998       1997            1998         1997  
                                     ---------- ----------     ----------   ----------
<S>                                                                            <C>        <C>             <C>          <C>      
Net sales                                $  61,891  $  56,710       $ 179,024    $ 163,054 
Cost of sales                               42,410     39,644         123,464      112,875 
                                         ----------  ---------       ---------    ---------
Gross profit                                19,481     17,066          55,560       50,179 

Selling and marketing expenses               5,694      5,208          17,390       15,718 
General and administrative expenses          6,203      5,845          17,558       17,412 
Research and development expenses            2,609      2,963           8,539        7,249 
Acquired research and development                -          -               -       11,391 
Impairment of goodwill and assets
  held for sale                                  -          -           2,733            -  
Tender offer costs                               -          -           1,273            -   
                                                                                ---------  ---------      ---------      --------
Income (loss) from operations                4,975      3,050           8,067       (1,591)

Interest expense, net                         (818)      (620)         (1,854)      (3,451)
Intellectual property license, 
  net of expenses                                -          -          21,217            -   
Other income (expense), net                    372         339         (7,842)         583 
                                                                                ---------  ----------     ----------     --------
Income (loss) before income taxes, 
  minority interest, joint venture, 
  and gain on sale                           4,529       2,769         19,588       (4,459)

Provision for income taxes                   1,400         800          8,539        1,978 
                                          ---------  ----------      ----------     -------
Income (loss) before minority interest,
  joint venture, and gain
  on sale                                    3,129       1,969         11,049       (6,437)

Minority interest                              (11)         98            (92)         222 
Equity in earnings of joint venture              -           -              -        1,430 
Gain on sale of investment, 
  net of income taxes                            -           -              -       24,321 
                                                                                ---------  ----------      ---------     --------
Net income                                $  3,118   $   2,067       $  10,957     $19,536 
                                                                                =========  ==========      =========    =========

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<PAGE>4


Net income per share:
  Basic                                   $    0.31  $     0.21      $    1.09     $    1.99 
  Diluted                                 $    0.30  $     0.20      $    1.04     $    1.90 
                                         =========  ==========      =========     =========

Number of shares used in calculating
net income per share:
  Basic                                  10,094,692   9,941,779     10,068,581     9,830,860
  Diluted                                10,488,452  10,464,567     10,519,120    10,290,920
                                         ==========  ==========     ==========    ==========


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

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<TABLE>
               KOLLMORGEN CORPORATION AND SUBSIDIARIES
                Condensed Consolidated Balance Sheets
                          (In thousands)
<CAPTION>
                           ASSETS
                                              September 30,
                                                     1998   December 31,
                                                         (unaudited)             1997  
                                                         ---------      ---------
<S>                                                     <C>              <C>       
Current assets:
  Cash and cash equivalents                              $ 10,913       $ 14,854 
  Accounts receivable (net of allowance of 
    $916 in 1998 and $971 in 1997)                        47,054          39,528 
  Recoverable amounts on long-term contracts                  5,948        5,762 
  Inventories                                             30,289          25,162 
  Prepaid expenses and other current assets               1,684        2,041 
                                                          ---------     ---------
Total current assets                                         95,888       87,347 

Property, plant and equipment, net                        29,560          26,673 
Goodwill, patents and other intangible assets                20,720       14,343 
Deferred income taxes                                         9,455        5,802 
Other assets                                                   12,526         11,279 
                                                           ---------    ---------
                                                           $168,149         $145,444 
                                                           =========    =========
                 LIABILITIES and SHAREHOLDERS' EQUITY

Current liabilities:                                        
  Accounts payable                                        $ 16,764         $ 18,467 
  Accrued liabilities                                       36,222           32,883 
  Income taxes payable                                       7,098            2,869 
  Line of credit                                             9,034            5,232 
  Current portion of long-term debt                          2,254            2,012 
                                                          ---------        ---------
Total current liabilities                                    71,372           61,463 

Long-term debt                                               36,094           36,379 
Other liabilities                                             7,171            5,874 
Minority interest                                               195              136 

Shareholders' equity:
  Common stock                                              26,929           26,921 
  Additional paid-in capital                                12,882           12,682 
  Retained earnings                                         19,623            9,268 
  Cumulative translation adjustments                          (250)            (602)
  Less common stock in treasury, at cost                    (5,867)          (6,677)
                                                           ---------        ---------
Total shareholders' equity                                   53,317           41,592 
                                                           ---------        ---------
                                                        $ 168,149        $ 145,444 
                                                         =========        =========
<FN>
See accompanying notes to unaudited condensed consolidated financial statements.  
/TABLE
<PAGE>
<PAGE>6

<TABLE>
               KOLLMORGEN CORPORATION AND SUBSIDIARIES
           Condensed Consolidated Statements of Cash Flows
                               (In thousands)
                                 (Unaudited)
<CAPTION>
                                                            For the
                                                        Nine Months Ended
                                                           September 30,
                                                        ------------------
                                                                  1998           1997  
                                                                 --------       ---------
<S>                                                             <C>             <C>       
Cash flows from operating activities:                                      
Net income from operations                                        $ 10,957        $ 19,536   
Adjustments to reconcile net income to 
  net cash provided by operating activities:
  Depreciation                                          3,892        3,521 
  Amortization                                          1,282          833 
  Impairment of goodwill and assets held for sale       2,733          -   
  Acquired research and development                       -         11,391 
  Gain on sale of assets                                   25      (24,403)
  Equity in earnings of joint venture                     -         (1,430)
  Deferred income taxes                                            (3,572)            199   
  Minority interest                                        59         (215)
  Other non-cash expenses                                  52           32 

Changes in operating assets and liabilities:
  Accounts receivable                                  (5,497)       3,520 
  Recoverable amounts on long-term contracts                         (186)            252
  Inventories                                          (3,083)        (817)
  Prepaid expenses and other current assets                           445             (33) 
  Accounts payable and accrued liabilities              2,671       (9,395)
  Other deferred expenses                                 901           79 
                                                                  ---------      ---------  
Net cash provided by operating activities              10,679        3,070 
                                                                  ---------      ---------  
Cash flows from investing activities:
  Capital expenditures                                 (6,327)      (4,266)
  Proceeds from sale of assets                                        250               -   
  Proceeds from sale of investment in joint venture                     -          41,396
  Acquisitions and equity investments, net of incone taxes         (10,250)  (15,221)
  Other                                                  (558)         262 
                                                                   ---------      ---------  
 Net cash provided by (used in) investing activities  (16,885)      22,171 
                                                                   ---------      ---------
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<PAGE>7



Cash flows from financing activities:
  Borrowings under credit lines, net                    3,145        5,314 
  Proceeds from common stock issued from treasury         (5)        1,078 
  Borrowings of long-term debt                          1,790          100 
  Repayments of long-term debt                         (1,822)     (26,580)
  Dividends paid                                         (602)        (590)
                                                                   ---------       ---------
Net cash provided by (used in) financing activities     2,506      (20,678)
                                                                   ---------       ---------
  Effect of exchange rate changes on cash and
    cash equivalents                                                  (241)          (127) 
                                                                   ---------       ---------
  Net increase (decrease) in cash and cash equivalents             (3,941)          4,436 
  Cash and cash equivalents at beginning of period     14,854       13,445 
                                                                   ---------       ---------
  Cash and cash equivalents at end of period                      $10,913         $17,881   
                                                                   =========       =========




<FN>
See accompanying notes to unaudited condensed consolidated financial statements.  
</TABLE>
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<PAGE>8

              KOLLMORGEN CORPORATION AND SUBSIDIARIES

      Notes to Unaudited Condensed Consolidated Financial Statements
                   (In thousands, except per share amounts)
                                 September 30, 1998

1.    The accompanying unaudited condensed consolidated financial statements
include the accounts of Kollmorgen Corporation and all of its majority
owned subsidiaries (the "Company").  

2.    In the opinion of management, the unaudited condensed consolidated
financial statements included herein contain all adjustments, consisting
only of normal recurring adjustments (except for items discussed in
Notes 8 through 13), necessary to present fairly the Company s financial
condition at September 30, 1998, the results of operations for the three-
month and nine-month periods ended September 30, 1998 and 1997, and the
cash flows for the nine-month periods ended September 30, 1998 and 1997. 
Certain prior year balances have been reclassified to conform with the
1998 presentation.  The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. 
See Management s Discussion and Analysis of Financial Condition and
Results of Operations for additional information.  These interim financial
statements should be read in conjunction with the Company s Annual Report
on Form 10-K for the year ended December 31, 1997.  The financial
information included herein is unaudited, with the exception of the
consolidated balance sheet at December 31, 1997, which has been derived
from the audited consolidated balance sheet on the Company's annual report
on Form 10-K.

3.    Net inventories consist of the following:

                                 September 30,    December 31,
                                                1998            1997  
                                          ---------       ---------
  Raw materials                            $ 13,631        $ 12,640 
  Work in process                            11,538           8,871 
  Finished goods                              5,120           3,651 
                                            ---------       ---------
                                          $ 30,289        $ 25,162 
                                            =========       =========

4.    Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standard No. 130 ( SFAS 130"), "Reporting Comprehensive
Income."  SFAS 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of SFAS 130
had no impact on the Company s net income or shareholders  equity.  The
Company s comprehensive earnings were as follows:  

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<PAGE>9



                                      For the                 For the
                                 Three Months Ended    Nine Months Ended
                                   September 30,           September 30,
                                 ------------------      ---------------
                                   1998     1997          1998     1997  
                                 -------   -------      -------  -------
  Net income                    $ 3,118   $ 2,067      $10,957  $19,536
  Foreign currency
      translation adjustment, net    367       161          243    (630)   
    
                                 -------   -------      -------  -------
                                 $ 3,485   $ 2,228      $11,200  $18,906
                                 =======   =======      =======  =======

5.    In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 131 ("SFAS 131"), "Disclosures about
Segments of an Enterprise and Related Information", which must be adopted
for fiscal years beginning after December 15, 1997.  Under the new
standard, companies will be required to report certain information about
operating segments in the consolidated financial statements.  Operating
segments will be determined based on the method by which management
organizes its business for making operating decisions and assessing
performance.  SFAS 131 also requires that companies report certain
information about their products and services, the geographic areas in
which they operate, and their major customers.  The Company will adopt
SFAS 131 for the yar ending December 31, 1998 and is currently evaluating
the effect, if any, of implementing SFAS 131.  

6.    In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities."  SFAS 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts (collectively
referred to as derivatives), and for hedging activities.  SFAS 133
requires companies to recognize all derivatives as either assets or
liabilities with instruments measured at fair value.  The accounting for
changes in fair value and gains or losses depends on the intended use of
the derivative and its resulting designation.  SFAS 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999.  The
Company expects to adopt SFAS 133 by January 1, 2000.  Had the Company
implemented SFAS 133 for the current reporting quarter, there would be no
material effect on the financial statements.  

7.    Basic earnings per share ("EPS") excludes the dilutive effect of common
stock equivalent securities and is computed by dividing net income by the
weighted-average number of common shares outstanding for the period. 
Diluted EPS reflects the potential dilution that could occur if securities
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<PAGE>10



or other instruments to issue common stock were exercised, converted into
common stock or resulted in the issuance of common stock that then shares
in the earnings of the entity.  A reconciliation between basic and diluted
EPS is as follows:   

                              For the                 For the
                                 Three Months Ended    Nine Months Ended
                                   September 30,           September 30,
                                 ------------------      ---------------
                                   1998     1997          1998     1997  
                                 -------   -------      -------  -------
  Net income                    $ 3,118   $ 2,067      $10,957  $19,536
  
  Shares used in net income
      per share   basic           10,095     9,942       10,069    9,831
  
  Effect of dilutive securities:
      Stock options                  393       523          450      460
                               -------   -------      -------  -------
  Shares used in net income
      per share   diluted         10,488     10,465      10,519   10,291

  Net income per share-basic      $0.31      $0.21       $1.09    $1.99
  Net income per share-diluted    $0.30      $0.20       $1.04    $1.90

During the third quarter of 1998, options to purchase 548,495 shares of
common stock at exercise prices ranging from $17.75 to $20.94 and with
expiration dates ranging up to May 26, 2008 were outstanding, but were not
included in the computation of diluted EPS because the options  exercise
prices were greater than the average market price of the common stock. 
During the first nine months of 1998, options to purchase 1,874 shares of
common stock at exercise prices ranging from $19.63 to $20.94 and with
expiration dates ranging up to May 12, 2008 were outstanding, but were not
included in the computation of diluted EPS because the options  exercise
prices were greater than the average market price of the common stock. 
Additionally, during both the third quarter and the first nine months of
1998, 905,000 common equivalent shares of the convertible subordinated
debentures were not included in the diluted EPS calculation as they were
antidilutive.  
  
Options to purchase 1,864 and 628 shares of common stock during the third
quarter and the first nine months of 1997, respectively, at exercise
prices of $17.44 and with expiration dates of August 13, 2007, were
outstanding, but were not included in the computation of diluted EPS
because the options  exercise prices were greater than the average market
price of the common stock.  Additionally, during both the third quarter
and the first nine months of 1997, 956,000 common equivalent shares of the
convertible subordinated debentures were not included in the diluted EPS
calculation as they were antidilutive.  

<PAGE>
<PAGE>11



8.  In January 1998, the Company announced a license agreement for its
electronic motion control patents in the amount of $27.2 million, which,
after legal and other expenses, resulted in income of $21.2 million. In
connection with its patent enforcement program, the Company has engaged
outside legal counsel to continue enforcement of the Company s patents and
accordingly, has recorded a charge in Other expense of $6.8 million to
cover legal expenses and other related costs.  The Company has spent
$710,000 in connection with its patent defense program for the first nine
months of 1998.  

9.  During the first quarter of 1998, the Company recorded a charge of
$2.7 million reflecting the impairment of assets.  Of this amount, $2.0
million related to the write-down of goodwill from its 1994 acquisition of
the assets of Sperry Marine.  Additionally, the Company increased its
reserve for impaired real estate by $0.7 million to reflect its current
assessment of the fair value of real estate currently held for sale.  

10. In the first quarter of 1998, the Company incurred $1.3 million of
expenses in conjunction with the tender offer for Pacific Scientific
Company.  

11. Effective January 1, 1998, the Company elected to change the vesting
method for post-retirement medical insurance benefits, resulting in a
curtailment charge in Other expense of $1.6 million.

12. The Company periodically reviews the assumptions and estimates used
in the calculation of its pension obligation, and in the first nine months
of 1998 recorded income of $1.0 million as a result of the updating of
these assumptions and estimates to be consistent with the Company s
experience.  

13. On July 1, 1998, the Company acquired the assets of the Magnedyne
division of Sierracin Corporation for $10.0 million in cash.  Magnedyne
has been included in the accompanying unaudited financial statements for
the three months ended and as of September 30, 1998.  The Company has
accounted for this acquisition as a purchase, and is evaluating the
allocation of the purchase price between completed technologies, other
assets and goodwill.  No material reserves relating to the purchase price
remain.  


     Management's Discussion and Analysis of Financial Condition
                    and Results of Operations

This filing contains forward-looking statements which involve risks and
uncertainties.  The Company s actual results may differ significantly from
the results discussed in the forward-looking statements.  Please refer to
the "Forward-Looking Statements" and "Risk Factors" included in the
Registration Statement on Form S-4 dated January 15, 1998.  


<PAGE>
<PAGE>12



                         RESULTS OF OPERATIONS

    In the first nine months of 1998, the Company s results of operations
were impacted by a number of events that should be described separately.
During the first quarter, the Company announced the first major license
agreement for its pioneering electronic motion control patents in the
amount of $27.2 million, which, after legal and other expenses, resulted
in income of $21.2 million. In connection with its patent enforcement
program, the Company has engaged counsel to continue enforcement of the
Company's patent estate, and accordingly, has recorded a charge of $6.8
million to cover legal expenses and other related costs.  The Company
recorded a charge of $2.7 million, primarily relating to the write-down of
goodwill from its 1994 acquisition of the assets of Sperry Marine. Also in
the first quarter of 1998, the Company incurred $1.3 million of expenses
in conjunction with the tender offer for Pacific Scientific Company.
Finally, the Company elected to change the vesting method for post-
retirement medical insurance benefits, resulting in a charge of $1.6
million.  The net of these items had a positive impact in 1998 of $8.8
million to the reported income before income taxes of the Company.  

    In the second quarter of 1997, the Company s results of operations
were impacted by a number of events that should also be described
separately. Effective December 31, 1996, the Company combined its Macbeth
division with the Color Control Systems business of Gretag AG and received
48% of the shares in the Swiss holding company that controlled the two
businesses (the "Joint Venture").  Accordingly, for the six month period
ended June 30, 1997, the Company accounted for its interest in the Joint
Venture using the equity method.  In June and August 1997, the Company
sold its interest in the Joint Venture resulting in a gain of $24.3
million.  Additionally, during the first half of 1997, in connection with
the acquisitions of Servotronix and Seidel, a portion of the purchase
prices were allocated to in-process research and development for products
that were not yet feasible.  The value of in-process research and
development of $10.5 million was expensed.  Also included in acquired
research and development was a charge of approximately $0.9 million for
technology acquired unrelated to the Servotronix and Seidel acquisitions.  
 
    Collectively, the above 1998 and 1997 items will be referred to as
the "Special Items" to provide for comparative discussion of the Company s
results on a consistent basis.  

    For the three months ended September 30, 1998, the Company had sales
of $61.9 million and net income of $3.1 million, equal to $0.30 per common
share (diluted).  These results compare with sales for the three months
ended September 30, 1997 of $56.7 million and net income of $2.1 million,
equal to $0.20 per common share (diluted). For the nine months ended
September 30, 1998, the Company had sales of $179.0 million and net income
of $11.0 million, equal to $1.04 per common share (diluted).  These
results compare with sales for the nine months ended September 30, 1997 of
$163.1 million and net income of $19.5 million, equal to $1.90 per common

<PAGE>
<PAGE>13 



share (diluted).  Excluding the impact of the Special Items discussed
above, the Company s net income for the nine months ended September 30
would have been $7.4 million equal to $0.70 per share (diluted) for 1998
and $6.8 million equal to $0.66 per share (diluted) for 1997.  The equity
in earnings of the Joint Venture was included in the reported results for
the 1997 period. Excluding these earnings, net income would have been $5.3
million or $0.52 per share (diluted).  

    Operating income for the three months ending September 30, 1998
increased to $5.0 million from $3.1 million in the same period of the
prior year.  Operating income for the nine months ending September 30,
1998 increased to $8.1 million from a loss in the same period of the prior
year of $1.6 million.  Excluding the Special Items discussed above,
operating income would have been $12.1 million and $9.8 million for the
nine months ending September 30, 1998 and 1997, respectively.  

  The Company's sales increased $5.2 million or 9.1% for the three
months ended September 30, 1998 as compared to the same period a year ago.
The Industrial and Commercial Group's revenue increased to $37.3 million
for the three months ended September 30, 1998 from $33.3 million or 12.0%
as compared to the three months ended September 30, 1997.  The increase
reflects the acquisition of Magnedyne in 1998, increases in the segment s
core servo business in the U.S. and Europe, and increased sales by the
Company s High Volume business.  These increases more than offset a
decline at the Company s engineering consulting business.  The Aerospace
and Defense Group's revenue of $24.6 million for the three months ended
September 30, 1998 represented an increase of 5.1% over the $23.4 million
of sales in same period of the prior year. The Industrial and Commercial
Group's revenue increased to $102.4 million for the nine months ended
September 30, 1998 from $88.4 million or 15.8% as compared to the first
nine months of 1997. The increase reflects the acquisition of Magnedyne in
1998, the inclusion of the sales of Seidel and Servotronix for all three
quarters, and increased sales by the Company s High Volume business. 
These increases more than offset a decline at the Company s engineering
consulting business.  The Aerospace and Defense Group's revenue increased
2.5% from $74.7 million for the first nine months of 1997 to $76.6 million
in 1998, a result of increased sales of both motion control systems and
new products.  

  The Company s gross margin as a percent of sales of 31.5% for the
three months ended September 30, 1998 increased from 30.1% for the same
period in the prior year. The Aerospace and Defense Group had an increase
in gross margin as a percent of sales from 30.7% for the third quarter of
1997 to 32.6% for the third quarter of 1998, reflecting strong margins on
motion control systems and improved margins on revenue recognized on long
term contracts.  The Industrial and Commercial Group had a decline in
gross margin as a percent of sales to 29.3% for the third quarter of 1998
from 29.7% in the third quarter of 1997. The Company s gross margin as a
percent of sales of 31.0% for the nine months ended September 30, 1998
increased from 30.8% for the same period in the prior year.  The Aerospace
and Defense Group had an increase in gross margin as a percent of sales
from 30.0% for the first nine months of 1997 to 31.3% in 1998 due to sales

<PAGE>
<PAGE>14



of high margin motion control components and systems.  The Industrial and
Commercial Group had a decline in gross margin as a percent of sales to
29.4% for the nine months of 1998 from 31.1% in 1997. This reflects a
decrease in margins due to volume declines in the Company s engineering
consulting business being somewhat offset by improved margins in the motor
and drive businesses. 

    Sales and marketing expenses were $5.7 million or 9.2% of sales in
the third quarter of 1998 as compared to $5.2 million or 9.2% of sales for
the the same period in 1997.  Sales and marketing expenses increased $1.7
million to 9.7% of sales in the first nine months of 1998 as compared to
9.6% for the same period in the prior year.  The increase in sales and
marketing expense reflects the Company s increased investment in a
European sales and marketing organization.  

  General and administrative expenses were $6.2 million or 10.0% of
sales in the third quarter of 1998 as compared to $5.8 million or 10.3% of
sales for the same period in 1997.  For the nine months ended September
30, 1998, general and administrative expenses declined to 9.8% of sales
compared to 10.7% for the same period in the prior year.  This decline is
a result of decreases in pension, legal and other corporate expenses.  

    Research and development expenses were $2.6 million or 4.2% of sales
for the third quarter of 1998 as compared with $3.0 million or 5.2% of
sales for the same period in the prior year.  Research and development
expenses were $8.5 million or 4.8% of sales for the nine months ended
September 30, 1998 as compared with $7.2 million or 4.4% of sales for the
same period in the prior year.  Research and development spending by the
Industrial and Commercial Group increased to $5.4 million for the first
nine months of 1998 from $3.4 million in 1997.  This increase in spending
was a result of the Seidel and Servotronix acquisitions in 1997.  Research
and development spending by the Aerospace and Defense Group decreased for
the period ending September 30, 1998 to $3.1 million from $3.8 million in
the same period of the prior year.  

    Net interest expense was $1.9 million and $3.5 million for the nine
month periods ending September 30, 1998 and 1997, respectively.  The
decrease in interest expense in 1998 as compared to 1997 is due to the
repayment, in the second quarter of 1997, of the balance of the $25
million term loan the Company entered into to fund the redemption of its
Preferred Stock in 1996.  In addition, the reduction in long-term debt as
a result of the Company's annual mandatory sinking fund payments on its
convertible subordinated debentures and higher invested cash balances
contributed to the decrease in the net interest expense.  
    
    The Company recorded a provision for taxes of 31% in the third
quarter that reflects the Company s expected tax rate excluding the patent
license income.  The tax rate for the nine months ended September 30, 1998
is 44% that reflects the impact of the patent licensing income.  The
Company paid Japanese withholding tax on this income and is not certain it
will be fully recoverable in 1998.  Additionally, this income is fully
subject to U.S. taxes and is taxed at a higher rate than the Company s
effective tax rate.  The Company s effective tax rate is less than the
statutory U.S. tax rate because some of the Company s foreign subsidiaries
operate in countries where the statutory rate is less than the U.S. rate.  

<PAGE>
<PAGE>15




    Bookings increased $23.5 million or 15.2% during the first nine
months of 1998 as compared to the same period in the prior year.  The
increase is due not only to the acquisitions of Seidel and Servotronix in
1997 and Magnedyne in 1998, but also to improved bookings in both the
Aerospace and Defense Group and the Industrial and Commercial Group,
excluding these acquisitions.  


                     LIQUIDITY AND CAPITAL RESOURCES

    The Company's consolidated cash position decreased by $3.9 million
during the first nine months of 1998.  Cash provided by operations was
$10.7 million, $16.9 million was used in investing activities, and $2.5
million was provided by financing activities.  

    Accounts receivable used $5.5 million reflecting higher sales and
weaker than anticipated collections.  Inventories used $3.1 million of
cash reflecting higher sales and an increase in inventory by the Company s
High Volume group.  Accounts payable and accrued liabilities provided $2.7
million as a result of taxes accrued in the first quarter which are unpaid
at September 30, 1997.  

    On July 1, 1998, the Company acquired the assets of the Magnedyne
division of Sierracin Corporation for $10.0 million in cash.  Magnedyne
designs and builds brushless and brush-type DC torque motors and drives. 
The Company's investing activities in the first nine months of 1998 also
included capital expenditures of $6.3 million primarily for capital
investments required for new product lines and for the replacement of
existing equipment to improve the efficiency of manufacturing.  

    The Company's financing activities provided $2.5 million of cash
during the year.  The Company borrowed $3.1 million against its short-
term lines of credit to fund working capital requirements in the U.S. and
Europe.  In addition, the Company borrowed $1.8 million in long-term debt
under its European lines of credit and made $1.8 million of sinking fund
payments on its convertible subordinated debentures.  The Company is
required, under the terms of the 8.75% convertible subordinated debenture,
to make certain mandatory sinking fund payments each year through the year
2009.  Common dividends paid were $0.6 million or $0.06 per common share
for the nine months ended September 30, 1998.  

    The Company believes that it can generate sufficient cash from
operations and its current borrowing line of credit to finance its cash
requirements for capital expenditures, sinking fund payments, potential
acquisitions, and working capital needs for the next twelve months.  


<PAGE>
<PAGE>16



                           YEAR 2000

    Certain of the Company's internal computer systems are not Year 2000
ready (i.e., such systems use only two digits to represent the year in the
date data fields and, consequently, may not accurately distinguish between
the 20th and 21st centuries or may not function properly at the turn of
the century).  The Company has been taking actions to either correct such
systems or replace them with Year 2000 ready systems.  The Company has
been working on the replacement of many of its systems over the past two
and a half years, and many of these systems are either currently
operational or will be in 1999.  The Company expects to implement
successfully the systems and programming changes necessary to address the
Year 2000 issues and does not believe that the cost of such actions will
have a material effect on the Company's results of operations or financial
condition.  There can be no assurance, however, that there will not be a
delay in, or increased costs associated with, the implementation of such
changes, and the Company's inability to implement such changes could have
an adverse effect on future results of operations.  


                     PART II - OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

    (a)  Exhibits - Listed below are the exhibits filed with this report. 

            3(i) Restated Certificate of Incorporation, amending
                 Article THIRD, Section F(2)(a)
             27  Financial Data Schedules  

    (b)  Reports on Form 8-K.  

        On November 4, 1998, the Company filed a Form 8-K reporting
        the adoption of an Amended and Restated Shareholder Rights
        Agreement dated October 22, 1998 between the Company and
        BankBoston NA.



        

<PAGE>
<PAGE>17


                       SIGNATURES


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



                           KOLLMORGEN CORPORATION


                           By:   /s/  Robert J. Cobuzzi       
                               Robert J. Cobuzzi, Senior Vice
                                 President, Treasurer and 
                                 Chief Financial Officer


Date: November 13, 1998