SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. - 20549
_________________________
FORM 10-Q
(Mark One)
* QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
   ACT OF 1934 
For the Quarterly Period Ended July 3, 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. 0-12588
_________________________

SALIENT 3 COMMUNICATIONS, INC.
 (Exact name of registrant as specified in its charter)

 Delaware                 23-2280922 
(State of Incorporation) (IRS Employer Identification No.)

 P.O. Box 1498, Reading, Pennsylvania             19603 
(Mailing address of principal executive offices) (Zip Code)

(610) 856-5500
______________________________________________________________________________
(Registrant's telephone number, including area code)
  
Indicate by check mark whether the registrant (1) has filed all 
reports required to be filed by Section 13 or 15(d) of the 
Securities Exchange Act of 1934 during the preceding 12 months (or 
for such shorter period that the registrant was required to file 
such reports), and (2) has been subject to such filing 
requirements for the past 90 days.
                                             Yes  X        No  

                                            Class A     Class B 
Number of shares of each class of
common stock outstanding as of
July 3, 1998 (excluding 2,691,194
Class A treasury shares):
                                           5,712,233     581,873
<PAGE>

SALIENT 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX

Part I.  Financial Information Pages

Item I.

 Consolidated Condensed Balance Sheets at
  July 3, 1998 and January 2, 1998 (unaudited)

 Consolidated Condensed Statements of Operations for the
  six and three month periods ended July 3, 1998
  and July 4, 1997 (unaudited)

 Consolidated Condensed Statements of Cash Flows
  for the six month periods ended July 3, 1998
  and July 4, 1997 (unaudited)

 Notes to Consolidated Condensed Financial Statements

Item II.

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

Part II.  Other Information

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

Item 5.  Exhibits and Reports on Form 8-K

Signatures  
<PAGE>
Part I. Financial Information                                
                                                           
 Salient 3 Communications, Inc. and Subsidiaries
 Consolidated Condensed Balance Sheets
 July 3, 1998 and January 2, 1998                                  
 (Unaudited)                                                            
 (000's)                                                           
                                             July 3,         January 2,
                                              1998             1998          
                                            --------         ----------
 ASSETS                                                                  
 [S]                                           [C]                [C]
 Current assets:
 Cash and cash equivalents                $    2,192         $    2,979         
 Accounts receivable, net of allowance
    for doubtful accounts of $1,729 and
    $1,680, respectively                      22,803             23,798     
 Inventories                                  15,886             20,128    
 Deferred income taxes                         6,000              3,805   
 Other current assets                          4,267              4,013      
 Net assets held for sale                     17,461             16,195      
                                             -------            -------
    Total current assets                      68,609             70,918   
                                             -------            -------
                                                                       
 Property, plant and equipment, at cost       46,270             44,121 
 Less accumulated depreciation and                                     
   amortization                               22,455             20,334        
                                             -------            -------
                                              23,815             23,787  
                                             -------            -------
 Deferred income taxes                         8,840              7,010        
 Other assets                                  1,000              1,000     
 Goodwill                                     29,199             44,782     
                                             -------            -------
 Total Assets                             $  131,463         $  147,497
                                             =======            =======
<PAGE>                                                                    
 LIABILITIES & STOCKHOLDERS' EQUITY                                
                                                                      
 Current liabilities:                                              
 Notes payable                            $   15,251         $    8,557     
                                                      
 Accounts payable                              6,579              7,587       
 Salaries and wages                            1,069              1,437     
 Income taxes, currently payable               1,248              3,384       
 Estimated liability for contract losses       1,470              1,470       
 Other accrued liabilities                    10,966              8,332      
                                             -------            -------
 Total current liabilities                    36,583             30,767         
                                             -------            -------
 Long-term debt                               11,039             11,245  
 Other long-term liabilities                   4,397              4,948  
 Self-insured retention                        2,677              2,677   
                                                                   
Stockholders' equity:                                               
 Common stock                                  8,985              8,985   
 Capital in excess of par value               37,737             37,835     
 Warrants outstanding                          1,665              1,665   
 Retained earnings                            70,141             89,929 
 Foreign currency translation adjustment          70                 52         
 Deferred compensation-restricted stock       (1,298)            (1,368)
 Treasury stock                              (40,533)           (39,238)
                                             -------            -------
                                              76,767             97,860   
                                             -------            -------
 Total Liabilities and Stockholders' 
 Equity                                   $  131,463         $  147,497
                                             =======            =======
 The accompanying notes are an integral part of the consolidated condensed
 financial statements.                                          

<PAGE>                                                   
<TABLE>
 Salient 3 Communications, Inc. and Subsidiaries
 Consolidated Condensed Statements of Operations
 (Unaudited)                                                  
 (000's except for share and per share information)
                                                            
                                                Six Months Ended                       Three Months Ended
                                          ----------------------------           ----------------------------
                                          July 3, 1998    July 4, 1997           July 3, 1998    July 4, 1997    
                                          ------------    ------------           ------------    ------------
 <S>                                         <C>             <C>                   <C>              <C>
 Telecommunications sales                    $57,747         $49,377              $29,772          $24,560 
 Cost of goods sold                           38,957          31,007               21,531           15,585 
                                              ------          ------               ------           ------
 Gross profit                                 18,790          18,370                8,241            8,975     
                                                                                                                                    
 Selling, general and administration          20,063          16,112                9,935            8,636                         
 Purchased in-process                                                                                                               
  research and development                         -           6,150                    -            6,150                         
 Research and development                      4,450           4,457                2,173            2,410                         
 Goodwill impairment and                                                                                                           
  restructuring charge                        18,190               -               18,190                -                         
 Goodwill amortization                           805             809                  335              458         
                                              ------         -------               ------           ------
 Operating loss                              (24,718)         (9,158)             (22,392)          (8,679)  
                                              ------          ------               ------           ------
 Interest income                                  74              33                   46               15 
 Interest expense                                829           1,123                  434              629 
                                              ------          ------               ------           ------
 Pre-tax loss from continuing operations     (25,473)        (10,248)             (22,780)          (9,293)
                                              ------          ------               ------           ------
 Benefit for taxes on loss                    (5,131)         (1,519)              (4,108)          (1,178)
                                              ------          ------               ------           ------
 Net loss from continuing operations         (20,342)         (8,729)             (18,672)          (8,115)  
                                              ------          ------               ------           ------
 Income from discontinued operations:
  Technical Services Segment (less                                           
  applicable taxes of $733 and $498                                             
  for the six month periods ended                                            
  and $490 and $195 for the three                                             
  month periods ended, respectively)           1,197             860                  799              314          
                                                                                                                     
  Gain on disposal of a Technical                                                                 
  Services Company (less applicable                                                                 
  income taxes of $583)                            -           1,080                    -            1,080                         
                                                                                                                                    
  Real Estate Segment (less applicable
  taxes of $381 for the six month period
  ended and $202 for the three month                                                                                                
  period ended, respectively)                      -             659                    -              336                         
                                              ------          ------               ------           ------
 Net income from discontinued operations       1,197           2,599                  799            1,730
                                              ------          ------               ------           ------
 Total net loss                             $(19,145)        $(6,130)            $(17,873)         $(6,385)
                                              ======          ======               ======           ======
 Per share of common stock (Basic and diluted):                      
                                                                                              
 Net loss from continuing operations        $  (3.24)        $ (1.38)            $  (2.99)         $ (1.28)  
                                                                                                                  
 Net income from discontinued operations:
      Technical Services Segment            $   0.19         $  0.31             $   0.13          $  0.22     
                                                                                                             
      Real Estate Segment                   $    -           $  0.10             $    -            $  0.05           
                                                ----            ----                 ----             ----
 Total earnings (loss) per share            $  (3.05)        $ (0.97)            $  (2.86)         $ (1.01)  
                                                ====            ====                 ====             ====
                                                               
 Cash dividends per share                   $   0.10         $  0.20             $    -            $  0.10    
                                                                                                                                    
Basic weighted average shares outstanding  6,282,624       6,312,166            6,251,815        6,307,880    
                                                                          
 The accompanying notes are an integral part of the consolidated condensed
 financial statements.                                                    
</TABLE>
<PAGE>                                                                          

 Salient 3 Communications, Inc. and Subsidiaries
 Consolidated Condensed Statements of Cash Flows
 (Unaudited)                               
 (000,s)
                                                         Six Months Ended
                                                  ------------------------------
                                                  July 3, 1998      July 4, 1997
                                                  ------------      ------------
 Cash flows from operating activities:                                   
                                                                         
 Net loss                                           $(19,145)          $(6,130) 
 Adjustments to reconcile net loss to net                                
  cash provided by (used for) operating activities:
     Gain on sale of subsidiary                          -              (1,663) 
     Depreciation and amortization                     3,321             3,826 
     Purchased in-process research and                                   
       and development write-off                         -               6,150 
     Goodwill write-off                               15,789               - 
     Reserve provisions                                  269               116 
     Benefit from deferred income taxes               (4,025)              500 
     Restrictive stock expense                            70                44 
     Changes in current assets and current liabilities
     net of effects from acquisitions and dispositions:
      Accounts receivable and unbilled revenue           321             4,197 
      Inventories                                      4,396            (3,539) 
      Other current assets                              (189)              (62) 
      Accounts payable and salaries and wages         (1,345)             (723) 
      Other accrued liabilities                        1,664            (4,334) 
      Income taxes, currently payable                 (2,060)           (1,721) 
                                                       -----             -----
      Net cash used for operating activities            (934)           (3,339) 
                                                       -----             -----
 Cash flows from investing activities:                                   
                                                                         
 Payments for acquisitions                            (1,274)          (19,302) 
 Payments for property, plant and equipment           (2,484)           (3,817) 
 Proceeds from sale of subsidiary                        -               7,213 
                                                       -----            ------
      Net cash used for investing activities          (3,758)          (15,906)
                                                       -----            ------
 Cash flows from financing activities:                                   
                                                                         
 Proceeds from issuance of debt                          -              19,900 
 Payment of debt                                        (218)           (8,123) 
 Borrowings under note payable                         6,694             9,044 
 Issuance of treasury stock in connection                                
   with stock option, award and purchase                                 
   plans                                                 205                83 
 Payments to acquire treasury stock                   (1,598)             (384) 
 Cash dividends paid                                    (644)           (1,278) 
 Other, net                                             (534)              323 
                                                       -----            ------
  Net cash provided by financing activities            3,905            19,565 
                                                       -----            ------
 Net (decrease) increase in cash and cash equivalents   (787)              320 
                                                                         
 Cash and cash equivalents at beginning of period      2,979             1,482 
                                                       -----             -----
 Cash and cash equivalents at end of period         $  2,192           $ 1,802 
                                                       =====             =====
 Supplemental cash flow disclosures:                                     
                                                                         
 Interest paid                                      $    803           $ 1,562 
                                                      ======             =====
 Income taxes paid, net of refunds received         $  1,708           $ 1,164 
                                                       =====             =====
                       
 The accompanying notes are an integral part of the consolidated condensed
 financial statements.                                                   

<PAGE>                                                                         
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(000's except for share and per share information) 

1. In the first quarter of 1997, the Company accounted for 
both its Technical Services and Real Estate Segments as 
discontinued operations.  

The results for technical services and the real estate 
segment have been classified as discontinued operations for 
all periods presented in the Consolidated Condensed 
Statements of Operations and Balance Sheets.  The assets and 
liabilities of the discontinued operations have been 
classified in the Consolidated Condensed Balance Sheets as 
"Net assets held for sale."   Discontinued operations have 
not been segregated in the Consolidated Condensed Statements 
of Cash Flows and, therefore, amounts for certain captions 
will not agree with the respective Consolidated Condensed 
Statements of Operations.

The following is a summary of revenue by discontinued 
segment:
                             Three Months Ended             Six Months Ended
                        July 3, 1998  July 4, 1997   July 3, 1998  July 4, 1997
                        ------------  ------------   ------------  ------------
 Revenues:
 Technical Services       $22,073        $18,382        $42,660       $36,093
 Real Estate                  -            2,180            -           4,330
                           ------         ------         ------        ------
                          $22,073        $20,562        $42,660       $40,423
                           ======         ======         ======        ======

2. During the first quarter of 1998, the Company adopted 
Statement of Financial Accounting Standards No. 130 (SFAS 
130), which specifies reporting requirements for 
comprehensive income.  The Company has evaluated the impact 
of 130 and has determined that it is not material.  The 
Company will also adopt the Statement of Financial Accounting 
Standards No. 131, "Disclosures about Segments of an 
Enterprise and Related Information" (SFAS 131), at the end of 
1998 and expects to report three reportable business segments 
- wireless, wireline and industrial.

3. The financial statements furnished herein reflect all 
adjustments which are, in the opinion of management, 
necessary for a fair presentation of financial position and 
results of operations for the interim periods.  Such 
adjustments are of a normal recurring nature.  The 
accompanying financial statements are presented in accordance 
with the requirements of Form 10-Q and consequently do not 
include all of the disclosures normally required by generally 
accepted accounting principles or those normally made in the 
Company's annual Form 10-K filing.  Accordingly, the reader 
of this Form 10-Q may wish to refer to the Company's Form 10-
K for the year ended January 2, 1998 for further information.

4. Net income per share of common stock was determined using the 
average number of Class A and Class B shares outstanding.  No 
preferred stock was outstanding as of July 3, 1998.

During the fourth quarter of 1997, the Company adopted 
Statement of Financial Accounting Standards No. 128 (SFAS 
128), which requires companies to report both basic and 
dilutive earnings per share.  Dilutive shares outstanding 
were determined on the assumption that all outstanding 
options, warrants and shares of restricted stock with a 
strike price below the respective period-end stock price, 
would be issued.  Dilutive shares outstanding for the second 
quarter of 1998 and 1997 were 6,252,972 and 6,335,961, respectively.  
Dilutive shares outstanding for the six month period ending July 3, 
1998 and July 4, 1997 were 6,284,663 and 6,374,057, respectively.  
Since these additional shares had an antidilutive impact on the 
Company's loss from continuing operations, the adoption of SFAS 128 
had no impact to the Company's earnings per share calculation.

5. In the second quarter of 1998, the Company recorded $23,089 
as a result of charges for restructuring and asset impairment 
($18,190), inventory write-downs ($4,353), and other 
miscellaneous expenses ($546).  The $23,089 charge after an 
income tax benefit of $4,225 was $18,864 or $3.02 per share 
for the second quarter.  The restructuring and asset 
impairment charges of $18,190 include: (a) $2,401 relating to 
severance and other costs for approximately 140 manufacturing 
employees due to outsourcing the manufacturing process at XEL 
Communications, Inc. (XEL), as well as the consolidation of 
manufacturing of the Instrument Associates Division of GAI-
Tronics into the Company's Reading, Pennsylvania headquarters 
and (b) an asset impairment charge of $15,789 relating to the 
write-down of the carrying value of goodwill related to XEL 
($10,987 with no tax benefit) and the Instrument Associates 
Division of GAI-Tronics (pretax charge of $4,802).  The 
Company also re-evaluated its product offerings and decided 
to discontinue certain low margin product lines.  As a 
result, other expenses of the transition include inventory 
write-downs at the Company's SAFCO and XEL subsidiaries and 
Instrument Associates Division of $4,353, which are included 
in cost of goods sold, and miscellaneous expenses of $546, 
which are included in selling, general and administration.

The following table displays a rollforward of the liabilities 
for the restructuring charge from April 3, 1998 to July 3, 
1998:
                         April 3,                              July 3,
                           1998                    Amounts      1998
  Type of Cost           Balance    Additions      Utilized    Balance
  --------------------   -------    ---------      --------    -------
  Employee separations  $    -        $1,075        $ (150)    $  925
  Facility closings          -         1,185            -       1,185
  Other                      -           141            -         141
                           -----       -----         ------     -----
  Total                 $    -        $2,401        $ (150)    $2,251
                           =====       =====         ======     =====

6. During 1997, several key employees were issued an aggregate 
of 80,000 shares of restricted stock in the Company.  The 
value of this stock is recorded as deferred compensation in 
the stockholders' equity section of the consolidated 
condensed balance sheets, and will be expensed over the 
vesting period.  The vesting period will not exceed 10 years 
and may be accelerated depending upon the achievement of 
certain objectives.

7. The components of inventories as of the balance sheet dates 
were as follows:
                               July 3, 1998       Jan. 2, 1998
                               ------------       ------------
Raw material and components       $8,293            $12,465
Work in process                    2,123              2,500
Finished goods                     5,470              5,163
                                  ------             ------
                                 $15,886            $20,128
                                  ======             ======

8. Other accrued liabilities includes an accrual relating 
primarily to workers' compensation of $1,835 and $2,128 at 
July 3, 1998 and January 2, 1998, respectively.  Also 
included in other accrued liabilities at July 3, 1998 was an 
accrual for $2,251 that relates to employee separations, 
facility closings and other costs, as discussed in Note 5.

9. Effective January 3, 1998, the Company acquired all of the 
outstanding stock of Elemec Systems, Ltd. (Elemec) for $952, 
including acquisition costs.  Elemec is part of the Company's 
industrial telecommunications business and was merged into 
GAI-Tronics Corporation's European operations.   

On April 21, 1997, the Company acquired all of the 
outstanding capital stock of TEC CELLULAR, Inc. (TEC) for 
$14,139, including acquisition costs, plus seven year 
warrants exercisable to purchase 100,000 shares of the 
Company stock at $18 per share.  TEC is part of the Company's 
wireless telecommunication business and is a division of 
SAFCO Technologies, Inc.

On April 30, 1997, the Company acquired all of the 
outstanding stock of DAC Ltd. (DAC) for $5,351, including 
acquisition costs.  DAC is part of the Company's industrial 
telecommunication business and was merged into GAI-Tronics 
Corporation's European operations.

10. On July 24, 1998, the Company completed the last of its 
planned divestitures with the sale of its Resource 
Consultants, Inc. (RCI) subsidiary to the management of RCI and an 
investor group for approximately $18,000, substantially all 
in cash.  The Company expects to report a gain of less than 
$100 on the transaction.  Proceeds of the sale were used to 
pay down outstanding bank debt.

On July 31, 1997, the Company sold its real estate complex, 
Green Hills Corporate Center to Brandywine Reality Trust for 
$40,000, substantially all in cash.  The sale resulted in a 
$7,000 gain, net of $5,362 of income taxes, or $1.11 per 
share.  Proceeds were used to reduce the Company's 
outstanding debt.

On June 24, 1997, the Company sold its SRA Technologies, Inc. 
subsidiary to Dames & Moore, Inc. for $8,800 in cash.  The 
sale of SRA resulted in a $1,080 gain, net of income taxes of 
$583, or $0.17 per share.  Proceeds were used to reduce the 
Company's outstanding debt.

11. During the first quarter of 1997, the Company paid $1,000 to 
the former principals of Instrument Associates, Inc. pursuant 
to the 1993 purchase agreement.

The Company also paid former shareholders of SAFCO 
Corporation $1,204 in the first quarter of 1997, as part of 
the 1996 asset purchase agreement. 

12. Under the terms of a prior loan agreement which expired on 
August 7, 1998, the Company had a working capital line of 
credit of $18,000 and an acquisition line of $50,000.  The 
agreement contained a number of financial and other covenants 
that, among other things, required maintenance of a certain ratio of 
funded debt to earnings before interest, taxes, depreciation and 
amortization.  The Company was in compliance with its debt 
covenants at July 3, 1998.

Under the terms of the new loan agreement, effective August 
8, 1998, the  Company has a working capital line of $15,000 
and an acquisition line of $15,000.  The agreement contains a 
number of financial and other covenants that, among other 
things, requires maintenance of a certain ratio of funded debt 
to earnings before interest, taxes, depreciation and amortization.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND 
FINANCIAL CONDITION.
(000's except for share and per share information)

Results of Operations

For the six months ended July 3, 1998, the Company lost $20,342 or 
$3.24 per share from continuing operations.  Included in the 
results are expenses of $23,089 resulting from charges for  
restructuring and asset impairment ($18,190), inventory write-
downs ($4,353), and other miscellaneous expenses ($546).  The 
$23,089 charge after an income tax benefit of $4,225 was $18,864 
or $3.02 per share for the second quarter.  

The restructuring and asset impairment charges of $18,190 include 
$2,401 relating to severance and other costs of outsourcing the 
manufacturing process at XEL Communications, Inc. (XEL), as well 
as the consolidation of manufacturing of the Instrument Associates 
Division of GAI-Tronics into the Company's Reading, Pennsylvania 
headquarters.  As disclosed in the first quarter 10-Q, the Company 
has been evaluating various strategic alternatives for XEL and, 
during the second quarter, decided to outsource its manufacturing 
so as to improve the focus of the business on sales, marketing, 
new product development and additional partnerships with leading 
telecommunications technology firms.  Exiting the manufacturing 
side of the business during the third quarter of 1998 will allow 
the Company to decrease its investment in XEL by selling its 
building and capital equipment.  No additional losses are expected 
to be incurred when this sale is undertaken.  Additionally, it is 
expected that outsourcing could result in an improvement in XEL's 
gross margins for core products.  To enhance the future 
profitability of the Instrument Associates division of GAI-
Tronics, the manufacturing function located in Memphis, Tennessee 
will be combined in the first quarter of 1999 with GAI-Tronics' 
manufacturing facility in Reading, Pennsylvania.  No additional 
loss is expected to be recorded when this combination occurs.

The restructuring and asset impairment charges of $18,190 also 
include an asset impairment charge of $15,789 relating to the 
write-down of the carrying value of goodwill related to XEL  
($10,987 with no tax benefit) and the Instrument Associates 
Division of GAI-Tronics (pretax charge of $4,802).  The charge 
results from the decreasing demand for and profitability of XEL's 
analog product line which has been its primary business since 
acquisition and Instrument Associates' decreasing sales and profit 
margins as orders from its key customers have declined.  In re-
evaluating XEL, it was determined that future expected cash flows 
would not support the related goodwill carrying value and that an 
impairment had occurred.  During the quarter, the Company also re-
evaluated the profitability prospects for Instrument Associates.  
While the Company remains committed to Instrument Associates' land 
mobile radio business, it was determined that projected cash flows 
did not fully support this subsidiary's carrying goodwill value and 
$4,802 of a total balance of $5,853 in goodwill was written off.

During the second quarter, the Company also re-evaluated its 
product offerings and decided to discontinue certain low margin 
product lines.  As a result, other expenses of the Company's 
business transition include inventory write-downs at the Company's 
SAFCO and XEL subsidiaries and Instrument Associates Division of 
$4,353, which are included in costs of goods sold, and 
miscellaneous expenses of $546, which are included in selling, general 
and administration.

For the six months ended July 4, 1997, the Company lost $8,729 or 
$1.38 per share from continuing operations.  Included in the 
results, is a $6,150 or $.97 per share charge for purchased in-
process research and development associated with the TEC Cellular 
Inc. (TEC) acquisition (Note 9).  The purchased in-process 
research and development had not yet reached technological 
feasibility and had no alternative future use as of the date of 
acquisition.

Excluding the one time charges in 1998 and write-off of purchased 
in-process research and development in 1997, the Company lost 
$1,478 or $.24 per share from continuing operations for the first 
six months of 1998 compared to a loss of $2,579 or $.41 per share 
for the same period in 1997.  The improvement was due to cost 
reductions realized by the wireline group which was marginally 
profitable from operations, the DAC acquisition in the second 
quarter of 1997 (Note 9) and reduced interest expense.

For the quarter, the Company lost $18,672 or $2.99 per share from 
continuing operations for 1998 compared to a loss of $8,115 or 
$1.28 per share for 1997.  Excluding the charges and write-off of 
purchased in-process research and development, the Company had 
income of $192 or $.03 per share from continuing operations in 
1998 compared to a loss of $1,965 or $.31 per share for 1997.  The 
improvement was due to higher sales at the wireless group, and 
improved sales and cost reductions realized by the wireline group.

Sales increased 17% and 21% for the six and three month periods in 
1998, respectively, compared to the same periods in 1997.  The 
increase in sales was primarily due to the acquisitions in the 
second quarter of 1997, the Elemec acquisition in the first 
quarter of 1998 (Note 9), and the wireline group's returning to a 
more normal sales level compared to the sharp decline experienced 
in the second quarter of 1997.

The following is a breakdown of sales by telecommunications group:
      
                  Year to Date        Second Quarter
                 1998     1997        1998     1997
                 ----     ----        ----     ----
Industrial     $34,080  $28,115     $17,406  $14,799
Wireline        13,512   14,802       6,799    5,298
Wireless        10,155    6,460       5,567    4,463
                ------   ------      ------   ------
  Total        $57,747  $49,377     $29,772  $24,560
                ======   ======      ======   ======

The sales by telecommunications group have been restated in 
connection with the Company's adoption of the Statement of 
Financial Accounting Standards No. 131, "Disclosures about 
Segments of an Enterprise and Related Information" (SFAS 131).  
The Company will adopt SFAS 131 at the end of 1998 and expects to 
report three reportable business segments - wireless, wireline and 
industrial. 

The higher industrial sales in both the six and three month 
periods of 1998 were due primarily due to the DAC and Elemec 
acquisitions.

The quarterly increase in the wireline group resulted from new 
partnership revenue and core product sales returning to a more 
normal level compared to the sharp decline experienced in the 
second quarter of 1997.  For the six month period ended July 3, 
1998, the wireline sales declined by 9% compared to the comparable 
period in 1997, due to a reduction in customer demand for analog 
channel units, offset in part by new partnership revenue and the 
decision at the end of the first quarter of 1997 to exit the 
contract manufacturing business. 

For the quarter, wireless sales increased 25% due to the strength 
of its test and measurement products.  For the year to date, the wireless 
group's sales increased 57%, due to sales of its test and 
measurement products and the TEC acquisition in the second quarter 
of 1997.

Excluding the one time charges, the gross profit percentage was 
40% and 42% for the six and three month periods in 1998, 
respectively, compared to 37% for the same periods in 1997.  The 
wireless group has a higher gross profit percentage than the industrial 
and wireline groups.  Therefore, as a result of higher sales by the wireless 
group and the wireless acquisition in the second quarter of 1997, the 
Company's gross profit percentage increased for the six months ended 
July 3, 1998.  For the quarter, higher margins within the wireline group 
reflect increased sales and cost reductions, while the industrial group's 
margins increased from more favorable product mix.

The Company anticipates improvements in results of operations in 
the second half of the year, led by new product releases and 
increased engineering revenue within the wireless group.  

Selling, General and Administration

Selling, general and administration increased 25% and 15% in the 
first half and second quarter of 1998 compared to the same periods 
in 1997.  The increase in selling, general and administration 
stems primarily from acquisitions and $546 relating to the one 
time charge.

As a percentage of sales, selling, general and administration was 
35% and 33% in the first half and second quarter of 1998 compared 
to 33% and 35%, respectively, in the same periods in 1997.  The 
unfavorable relationship for the six months ended July 3, 1998, 
stems primarily from the one time charge of $546, and 
the increase in the percentage of business coming from the 
wireless group.  The wireless group has a higher percentage of selling, 
general and administration to sales compared to the industrial and 
wireline groups.  The favorable relationship in the second quarter stems 
primarily from improvements in the wireline and wireless groups, offset 
in part by the $546 relating to the one time charge.  The wireline unit 
increased sales while cost reduction initiatives reduced its selling, 
general and administration expense.  The wireless group increased 
sales without a corresponding increase in expenses.

Research and Development, Goodwill Amortization and Interest 
Expense

For the quarter, research and development decreased 10% primarily 
due to reductions at the wireline group.  Year to date, research 
and development was flat due to the reductions at the wireline 
group, offset by the second quarter 1997 acquisitions and the Elemec 
acquisition.

For the quarter, goodwill amortization decreased 27% due to the 
asset impairment and related write-off of XEL's and Instrument 
Associates' goodwill, offset in part by the Elemec acquisition.  
Year to date, goodwill amortization was flat due to the write-off 
of all of XEL's and a portion of Instrument Associates' goodwill, 
offset by the 2nd quarter 1997 acquisitions and the Elemec 
acquisition.

Interest expense declined 26% and 31% in the first half and second 
quarter of 1998 compared to the same periods of 1997, due to the 
proceeds from the sales of discontinued operations, offset in part 
by payments for the acquisitions.

Provision for taxes on income

Excluding the aforementioned charges, the effective tax rate was 
38% in the first half and second quarter of 1998 compared to 37% 
in the same periods of 1997.

Income from discontinued operations

In June 1996, the Company announced that its Board of Directors 
had authorized management to explore strategic options for its 
remaining subsidiaries within the technical services and real 
estate segments.  The decision was reached because of the 
Company's desire to focus its business only on telecommunications 
equipment.

In accord with this decision, during the first quarter of 1997, 
the Company accounted for its technical services and real estate 
segments as discontinued operations.

On July 24, 1998, the Company completed the last of its planned 
divestitures with the sale of its Resource Consultants, Inc. (RCI)
subsidiary to the management of RCI and an investor group for 
approximately $18,000, substantially all in cash.  The Company 
expects to report a gain of $100 on the transaction.  Proceeds of 
the sale were used to pay down outstanding bank debt.

On July 31, 1997, the Company sold its real estate complex, Green 
Hills Corporate Center (GHMC), to Brandywine Realty Trust, for 
$40,000, substantially all in cash.  The sale resulted in a $7,000 
gain, net of income taxes of $5,362, or $1.11 per share.  On June 
24, 1997, the Company sold its SRA Technologies, Inc. (SRA) 
subsidiary to Dames & Moore, Inc. for $8,800 in cash.  The sale of 
SRA resulted in a $1,080 gain, net of income taxes of $583, or 
$0.17 per share.  The Company reduced its debt levels with the 
sales proceeds.

Liquidity and Capital Resources

Working capital decreased $8,125 in 1998.  The decline in working 
capital was due to the creation of short term reserves associated 
with the one time charges, stock repurchases, and the purchase of 
Elemec.  Amounts generated from operations, available cash and cash 
equivalents and lines of credit should provide adequate working capital 
through 1998.  In addition, the Company announced on January 28, 1998, 
the elimination of the $0.10 per share quarterly dividend after the 
March 10, 1998 payment.  Elimination of the dividend will provide 
additional funds to satisfy working capital requirements.  The 
Company does not expect to make any contingent payments to former 
XEL and SAFCO Corporation shareholders during 1998.

Lines of credit agented by First Union National Bank, are 
available through June 30, 1999 to fund both short-term cash needs 
as well as future acquisitions.  As of July 3, 1998, the Company 
had working capital lines of credit available of $23,000,  
reduced by outstanding borrowings of $15,251 and issued letters of 
credit aggregating $931.  The Company was in compliance with its 
debt covenants at July 3, 1998.

Under the terms of the new loan agreement, effective August 8, 
1998, the Company has a working capital line of $15,000 and an 
acquisition line of $15,000.  The agreement contains a number of 
financial and other covenants that, among other things, requires a 
certain ratio of funded debt to earnings before interest, taxes, 
depreciation and amortization.

The Company estimates that its total capital expenditures in 1998, 
excluding acquisitions, will be approximately $5,500.  No 
restrictions on cash transfers between the Company and its 
subsidiaries exist.

Other

In the second quarter of 1997, the FASB issued Statement of 
Financial Accounting Standards No. 130, "Reporting Comprehensive 
Income" (SFAS 130).  The Company assessed SFAS 130 during the 
first quarter of 1998, and determined that SFAS 130 would have no 
material effect on the Company.

The currency problems with certain Asian countries have had a 
negative impact to their economies.  The Company currently sells 
to customers located in some of these countries and, although the 
current financial conditions will most likely reduce the amount of 
products sold, the Company does not expect a material impact on 
operations.

The Company has assessed the Year 2000 issue and it is not 
expected to have a significant impact on ongoing results of 
operations.

This Form 10-Q contains certain statements of a forward-looking 
nature relating to future events or the future financial 
performance of the Company.  Such statements are only predictions 
and involve risks and uncertainties, and actual events or 
performance may differ materially as expressed in any such forward 
looking statements.  Potential risks and uncertainties include, 
without limitation: projections regarding 1998 subsequent 
revenues, transaction gains, product diversity, decreased 
investment, operating profitability, expected orders from 
contracts, market position, expected new technology partnerships, 
the effect of general economic conditions in the United States and 
Asia, the impact of competitive products, services and pricing, and 
demand and market acceptance risks of current and new products and 
services; and with respect to the Telecommunications business, the 
uncertain effect of the Telecommunications Act of 1996, technology change, 
and risks of product development and commercialization 
difficulties.  Further information on factors that could affect 
the Company's future financial performance can be found in the 
Company's other filings with the Securities and Exchange 
Commission.  Words used in this report such as "positioned", 
"yields", "should generate", "appears", "viewed", "could 
potentially", "would position", "expected", and "should allow" 
indicate the presence of forward looking statements.
<PAGE>
Part II.  Other Information                                         
                                                                  
Item 4.  Submission of Matters to a Vote of Security Holders
                                                                 
At the Company's Annual Meeting of Shareholders held on April 29, 1998,
the shareholders elected three directors, approved changes to the Long Term
Incentive Plan, approved changes to the Directors' Stock Option
Plan, approved changes to the Direct Stock Purchase Plan, and approved the 
retention of the current independent auditors.              
                                                                      
The results of the voting were as allows:
                                                                   
For Director                               Granted     Withheld
                                                  
John W. Boyer, Jr.                         526,415      16,760         
Dennis E. Foster                           530,532      12,643         
Donald E. Lyons                            526,415      16,760            
                                                                           
                                                                        BROKER
Other proposals                        FOR       AGAINST    ABSTAIN    NON-VOTES
                                                                               
Approval of an increase in the                                                 
   number of shares available                                                 
   under the Long Term                                                         
   Incentive Plan                     512,046      30,651       478            -
                                                                              
Approval of an increase in the                                                 
   number of shares available                                                  
   under the Directors'                                                        
   Stock Option Plan                  509,538      32,680       957            -
                                                                               
Approval of an increase in the                                                 
   number of shares available                                                  
   under the Direct Stock                                                      
   Purchase Plan                      529,126      13,089       960            -
                                                                               
Ratification of appointment                                                    
   of Arthur Andersen LLP                                                      
   as independent auditors            529,126      13,089       960            -
                                                                     
<PAGE>

Item 5.  Exhibits and Reports on Form 8-K
 (a) Exhibits
  None.

 (b) Reports on Form 8-K
  None.

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.
      Salient 3 Communications, Inc.

     /s/Paul H. Snyder 
     Paul H. Snyder
     Senior Vice President and 
     Chief Financial Officer

Date:  August 14, 1998