UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549

                                FORM 10-K

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

[X] Annual report pursuant to section 13 or 15(d) of the Securities 
    Exchange Act of 1934 for the fiscal year ended January 2, 1999 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 number:     0-15627

                      SEQUENT COMPUTER SYSTEMS, INC.
          (Exact name of registrant as specified in its charter)

             Oregon                              93-0826369
(State or other jurisdiction of         (I.R.S. Employer Identification Number) 
 incorporation or organization)     


          15450 S.W. Koll Parkway, Beaverton, Oregon  97006-6063
       (Address of principal executive offices, including zip code)

    Registrant's telephone number, including are code:   (503) 626-5700

    Securities registered pursuant to Section 12(b) of the Act:   None

     Title of each class         Name of each exchange on which registered
   ______________________                ______________________

       Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, $.01 par value
                  Rights to purchase Preferred Stock
                          (Title of Class)

  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 by check mark if disclosure of delinquent filers pursuant to 
Item 405 of Regulation S-K is not contained herein, and will not be 
contained, to the best of registrant's knowledge, in definitive proxy or 
information statements incorporated by reference in Part III of this Form 
10-K or any amendment to this Form 10-K.

  Aggregate market value of Common Stock held by nonaffiliates of the 
Registrant at March 1, 1999, based on the closing price on such date on 
the NASDAQ National Market System:  $408,419,373.

  Number of shares of Common Stock outstanding as of March 1, 1999:  
43,608,297.

                 Documents Incorporated by Reference
                                                    Part of Form 10-K into
           Document                                   which incorporated
1998 Annual Report to Shareholders                      Parts II and IV
 Proxy Statement for 1999 Annual     
    Meeting of Shareholders                                Part III



                         TABLE OF CONTENTS

Item of Form 10-K                                                      Page

PART I

  Item 1.    Business                                                    3

  Item 2.    Properties                                                 15

  Item 3.    Legal Proceedings                                          16

  Item 4.    Submission of Matters to a Vote of Security Holders        16

  Item 4(a). Executive Officers of the Registrant                       16

PART II

  Item 5.    Market for the Registrant's Common Equity and              17
             Related Stockholder Matters

  Item 6.    Selected Financial Data                                    17

  Item 7.    Management's Discussion and Analysis of Financial          17
             Condition and Results of Operations

  Item 7(a). Quantitative and Qualitative Disclosures of Market Risk    17     

  Item 8.    Financial Statements and Supplementary Data                17

  Item 9.    Changes in and Disagreements with Accountants              17
             on Accounting and Financial Disclosure
PART III

  Item 10.   Directors and Executive Officers of the Registrant         18

  Item 11.   Executive Compensation                                     18

  Item 12.   Security Ownership of Certain Beneficial Owners and        18
             Management     

  Item 13.   Certain Relationships and Related Transactions             18

PART IV

  Item 14.   Exhibits, Financial Statement Schedules and Reports        19
             on Form 8-K

SIGNATURES                                                              27



                                 PART I
 
 
Item 1. Business.

  Sequent Computer Systems, Inc. ("Sequent" or "the Company") is a leading 
provider of Intel Corporation ("Intel") -based high-end, scalable, data center 
systems and solutions for large organizations.

  Sequent pioneered the development of large-scale, Intel-based symmetric 
multiprocessing ("SMP") systems in the 1980s and early 1990s and, in 1996, was
first to market with large, cache coherent non-uniform memory access ("CC-NUMA")
systems built with Intel Pentium Pro processors.  In October 1998, Sequent 
launched its second-generation NUMA-Q(TM) 2000 data center servers, 
incorporating Intel's Pentium II Xeon processors and designed to scale from 4 
to 64 processors in a single system with a single instance of DYNIX/ptx?, 
Sequent's scalable UNIX operating system.  In December 1998, the Company 
introduced a Xeon-based version of NUMACenter(TM), its mixed mode computing 
environment enabling rapid deployment, lower cost and central management of 
large-scale, mission critical Windows NT Server applications with a large, 
back-end UNIX database server.  In January 1999, Sequent announced NUMA-Q 1000,
a new line of midrange servers that scale from 4 to 8 Xeon Processors, run 
UNIX or Windows NT, and deliver price/performance equivalent to midrange 
RISC-based (Reduced Instruction Set Computing) UNIX servers.

  Sequent's NUMA-Q 2000 products are used primarily as database servers 
for large commercial applications:  custom on-line transaction processing 
("OLTP"); packaged business (financial, manufacturing and human resources) 
solutions, also called enterprise resource planning ("ERP") solutions; and 
customer relationship management ("CRM"), a broad solution set that 
includes back office decision support systems ("DSS") and data warehouses 
supporting front-office marketing, sales and service applications.  The 
Company's NUMACenter framework is designed to optimize mixed mode 
environments where application servers running Windows NT are supported by 
a large UNIX database server.  The Company's NUMA-Q 1000 systems are 
designed, priced and marketed as development systems and application 
servers.

  Currently, the Company's products run Sequent's DYNIX/ptx UNIX 
operating systems and Microsoft Corporation's ("Microsoft") Windows NT.  
In October 1998, International Business Machines Corporation ("IBM") 
announced "Project Monterey," a cooperative program with Sequent and Santa 
Cruz Operation ("SCO") to develop a standard version of IBM's AIX UNIX 
operating system for Intel's 64-bit (IA-64) processor architecture, code-
named "Merced."  Sequent plans to introduce Merced-based systems running 
Project Monterey UNIX shortly after Merced is generally available, which 
is expected to be in the second half of 2000.  Meanwhile, the Company has 
announced plans to align its DYNIX/ptx operating system with SCO UnixWare 
and incorporate features of IBM's AIX UNIX operating system.  Rebranded as 
UnixWare ptx Edition, this enhanced 32-bit operating system will support 
selected IBM software and provide a high-end path to IA-64 UNIX being 
developed by IBM under Project Monterey.  The target date for general 
availability of UnixWare ptx Edition is expected to be the fourth quarter 
of 1999.

  Sequent sells its products and services worldwide through its direct 
sales force, through distributors and, increasingly, through arrangements 
with systems integrators ("SIs").  Sequent's direct sales efforts are 
focused on large organizations with the goal of establishing and 
maintaining long-term "major account" relationships.  The Company's SI 
partners, such as Arthur Andersen Business Consultants ("AABC") and 
Electronic Data Systems Corporation ("EDS") generally have greater access 
than Sequent to the Company's target accounts and afford opportunities for 
the Company to gain access to those accounts by partnering with them to 
sell complete solutions.  For several years, Sequent has partnered with 
South African SI PQA (formerly "Persetel") to sell Sequent products in 
South Africa.  In January 1999, Sequent announced that it signed a 
strategic partnership agreement with Comparex Holdings Limited 
("Comparex"), a wholly-owned subsidiary of PQA.  The partnership agreement 
allows Comparex to take responsibility for Sequent's sales activities in 
Austria, Belgium, Germany, The Netherlands, Portugal, Spain and 
Switzerland.  Sequent's operations in the United Kingdom and France, which 
represent the majority of its European business, are not included in the 
partnership agreement.  Comparex will work with Sequent to market the 
Company's products and services in the regions included under the 
agreement.

  Since the early 1990s, Sequent has enhanced its competitive position 
by providing consulting and professional services to help large 
organizations identify complex IT problems and develop solutions that 
combine its products with those of its hardware, software and solutions 
partners.  The Company's high-end professional services capability has 
enabled Sequent to shift the focus of its business from selling systems to 
offering solutions that combine systems and services.  Sequent's solution-
oriented expertise is geared to offerings in three basic categories: 
custom OLTP; ERP solutions; and large DSS/data warehousing applications.  
Over the past five years, the knowledge and expertise of Sequent's 
professional services organization have become key differentiators for the 
Company, enabling Sequent to participate in a growing number of projects 
where the sale of large systems follows or accompanies the sale of 
significant professional services contracts.

  For existing customers, Sequent provides a broad array of 24-hour 
data center services designed to ensure the smooth operation and high 
availability of their solutions.  These include system support services, 
environmental services, management support services and business 
protection services.

  The Company was incorporated in Delaware in January 1983 and was 
reincorporated in Oregon in December 1988.  Unless the context otherwise 
requires, references in this Report on Form 10-K to the "Company" or 
"Sequent" refer to the prior Delaware corporation, the current Oregon 
corporation and its subsidiaries.  The Company's principal executive 
offices are located at 15450 S.W. Koll Parkway, Beaverton, Oregon 97006, 
and its telephone number at that location is (503) 626-5700.

Market Overview

  The proliferation of new technology, data and information is rapidly 
changing the face of business.  Within the past few years, standard ERP 
applications from software vendors such as Baan Company ("Baan"), Oracle 
Corporation ("Oracle"), PeopleSoft, Inc. ("PeopleSoft") and SAP have 
transformed the data center, replacing custom OLTP applications and 
enabling large organizations to capture large volumes of data about their 
businesses.  With the rapid expansion of the World-Wide Web, growing 
numbers of organizations have established electronic links with customers, 
partners and suppliers, giving them access to vast amounts of new data.  
These changes have driven demand for sophisticated DSS and data 
warehousing applications that allow organizations to analyze that data and 
convert it into information that will give them a competitive advantage.  
As a result, DSS/data warehousing has become one of the fastest growing 
segments of the high-end, open systems computing market.

  With the knowledge made possible by the ability to access and analyze 
all aspects of their business, organizations have increasingly shifted 
their focus from what they produce to what customers buy.  In today's 
commodity-based markets, companies are discovering that what a customer 
does or does not buy often has less to do with the products or services 
themselves than with the relationship they have established--or failed to 
establish--with the customer.  Growing awareness of this fact has given 
rise to a new business strategy called CRM.  The goal of CRM is to 
assemble all of an organization's information about its customers and 
leverage that knowledge base during each customer interaction to keep them 
as customers and, whenever possible, sell them new products or services. 

  The overall growth of data center solutions (OLTP, ERP, DSS/DW and 
CRM) is driving demand for servers, including application servers that run 
the application software and database servers that manage the huge amounts 
of data used by the application.  

Business Strategy

  Sequent's goal is to become the leading provider of Intel-based UNIX 
and Windows NT solutions for the data center.  The Company's business 
strategy is designed to leverage its own resources (leading edge 
technology and data center knowledge and expertise) and those of its 
business and technology partners to achieve that goal.

  Since 1983, Sequent has pioneered the development of scalable 
computer architectures for large database applications.  With its NUMA 
architecture, the Company continues to lead the industry in this area.

  Since 1987, Sequent has been the leading provider of large-scale 
Intel-based systems and has worked closely with Intel to ensure that its 
own product roadmap is aligned with Intel's.  As the volume leader in 
microprocessors, Intel is the preferred architecture for application 
development, and Intel's share of the server market is projected to grow 
significantly over the next several years.  The Company currently enjoys a 
close working relationship with Intel and expects that relationship to 
continue.

  Sequent's DYNIX/ptx operating system has long been recognized as one 
of the industry's most scalable UNIX operating systems.  In the server 
marketplace, however, volume attracts application software suppliers and 
the Company's focus on low-volume, high-complexity projects has limited 
the number of applications ported to DYNIX/ptx to date.  To address this 
issue, Sequent designed its NUMA architecture to run both DYNIX/ptx and 
Microsoft Windows NT, giving Sequent customers access to the broad range 
of applications being developed for Microsoft's enterprise operating 
system.  To compensate for the scalability limitations of Windows NT, the 
Company developed NUMACenter, a hardware and software environment that 
allows customers to run Windows NT applications with a scalable, back-end 
UNIX database and single-point monitoring of all resources.  Recently, the 
Company also entered into agreements with IBM and SCO that will enhance 
and eventually replace DYNIX/ptx with versions of the UNIX operating 
system that are more broadly supported by third-party software vendors.  
During 1999, the company intends to make DYNIX/ptx binary compatible with SCO 
UnixWare, enhanced with features from IBM's AIX operating system, and rebranded
as UnixWare ptx Edition.  Simultaneously, the Company is collaborating with 
IBM to develop a 64-bit version of AIX optimized for NUMA and Intel's IA-
64 processor architecture.  Intel and IBM are contributing significant 
resources to fund the migration of third-party software to the new 
operating system.

  In the late 1980s Sequent established close working relationships 
with Oracle, Informix Corporation ("Informix") and other vendors of 
relational database software, acquiring substantial database knowledge and 
expertise that continue to distinguish the Company from its competitors.  
Sequent is currently building relationships with Microsoft and IBM that 
the Company believes will distinguish it as a provider of solutions based 
on SQL Server and the DB2 Universal Database.

  Although the number of applications ported to DYNIX/ptx has been 
limited, the major ERP applications have been available on Sequent 
platforms, and the Company has distinguished itself in the deployment and 
support of some of the largest--and in some cases the largest--
implementations of Baan, PeopleSoft and Oracle Applications software in 
the world.  The Company's NUMACenter offering has also distinguished 
Sequent as a leading provider of mixed-mode (UNIX & Windows NT) SAP 
solutions, one of only two mixed-mode providers authorized by SAP.

  As industry spending on ERP applications has slowed, Sequent has 
focused its knowledge of large database applications and architecture on 
the growing market for CRM applications supported by large DSS/data 
warehousing implementations.  During the past three years, the Company has 
established a strong track record in DSS/data warehousing, winning first-
place "Best Practices" awards from the Data Warehousing Institute for 
three consecutive years and earning the institute's top "Leadership Award" 
in 1998.  In December 1998, Sequent announced a strategic alliance with 
industry leader Siebel Systems, Inc. ("Siebel") to deliver Siebel's 
integrated family of front-office (sales, marketing and customer service) 
products on NUMACenter.  CRM, including back-office DSS/data warehousing, 
will be a major focus for the Company in 1999.

  Since 1992, the Company's success in the data center has stemmed 
increasingly from its ability to provide high-end consulting services 
geared toward the design and implementation of large database 
applications.  The Company plans to continue investing in the growth and 
development of its service organizations as an integral part of its data 
center strategy.

  Because Sequent competes directly with much larger companies, a key 
part of the Company's strategy is to sell its products and services 
through cooperative relationships with SIs who have broad market presence 
globally or in specific geographic regions.  The Company currently has 
strategic relationships with AABC, EDS and PQA/Comparex (Europe and South 
Africa), and is working with certain other integrators to establish 
additional marketing opportunities. 

Products

  Complex data center applications that serve a broad spectrum of end 
users--employees, partners, customers--require round-the-clock access, 
good response times and flexibility for future growth.  In computing 
requirements, this translates to reliability, high availability, high 
performance and scalability.  With the move by many companies toward 
"virtual data centers" that extend their computing environments beyond the 
perimeters of their own organizations, the number of users and the volume 
of data associated with business-critical applications continues to grow 
exponentially.  As a result, scalable servers, large enterprise storage 
systems and systems management solutions have become necessities.  

  Sequent has historically provided large-scale, business-critical 
computing to meet these types of requirements.  The Company's current 
products based on its NUMA architecture were designed for data-center-
class computing environments, whether they reside in today's equivalent of 
The Glass House or span a virtual enterprise.

  NUMA Architecture.  Sequent's NUMA technology is based on a four-way 
SMP Intel baseboard with NUMA features and enhancements added by Sequent 
to improve its performance and reliability as a component or building 
block for large, scalable servers.  In systems with more than 8 
processors, these components, called "quads", are connected with a device 
called IQ-Link(TM).  Developed by Sequent in cooperation with Vitesse 
Semiconductor Corporation, IQ-Link is a proprietary, high-performance 
interconnect that uses a gallium arsenide data pump to transfer data 
between quads at the rate of one gigabyte per second.  IQ-Link has the 
ability to monitor the Intel processor bus on a specific quad and respond 
to requests for data contained in memory on a different quad, either by 
accessing the data from memory on the other quad or by directing the 
request to data stored in its on-board cache (hence the term, "non-
uniform" memory access).  Because latency (the time it takes to retrieve 
data from memory on another quad) slows system performance, IQ-Link uses 
special algorithms to minimize latency by maximizing the "cache hit rate," 
i.e., the number of times requested data is available in its on-board 
cache.  IQ-Link also ensures the accuracy of data in its cache (cache 
coherency) by updating its cache whenever data in the original memory 
location is changed. 

  Based on standard Intel building blocks and other industry-standard 
components, Sequent's scalable NUMA architecture enables the Company to 
leverage advances in open systems technology--including processor 
enhancements, storage technology, communications and user-interface 
enhancements--and incorporate these advances in its product offerings 
quickly and inexpensively.  This aspect of the NUMA architecture directly 
benefits customers by enabling them to upgrade their installed Sequent 
systems without altering source programs, retraining users or replacing 
hardware and software not directly affected by the upgrade.

  Platforms.  Sequent manufactures and sells two server lines under its 
trademark NUMA-Q brand: high-end NUMA-Q 2000 and mid-range NUMA-Q 1000.

  NUMA-Q 2000 is scalable from 4 to 64 processors and runs Sequent's 
DYNIX/ptx UNIX operating system.  The second-generation NUMA-Q 2000 with 
Intel Pentium II Xeon processors was introduced in October 1998 and 
immediately achieved record setting benchmark numbers in the Transaction 
Performance Processing Council's TPC-C and TPC-D benchmarks.  The TPC-C 
benchmark test, which measures OLTP performance, used a 64-processor 
system and showed near-linear scalability with another NUMA-Q 2000 
benchmark run with 32 processors.  The TPC-D benchmark test, which 
measures DSS performance, was run at the one terabyte scale and set new 
performance and price/performance records at the time it was run.

  NUMA-Q 1000 is a 4- or 8- processor server that can run either UNIX 
or Windows NT.  Designed for price/performance in the midrange, NUMA-Q 
1000 uses a DL2 (direct link) interconnect that is specially developed for 
a two-quad system.  The system delivers performance comparable to that of 
a four or eight-processor NUMA-Q 2000 system at a price equivalent to the 
most aggressively priced midrange UNIX products from Sequent's 
competitors. NUMA-Q 1000 also enables operating system flexibility by 
allowing bi-directional migration between UNIX and Windows NT.

  In addition to the products the Company manufactures, Sequent OEMs a 
midrange Windows NT server from NCR Corporation ("NCR").  Sold under the 
brand name NTX 2000, it is a commodity Windows NT server in a pedestal 
configuration.  Sequent intends to OEM NCR's rackmounted system beginning 
in the first half of 1999.

  Sequent also offers a multi-tiered, mixed operating system framework 
called NUMACenter.  NUMACenter is an application deployment platform that 
meets the needs of many of today's applications by providing a two-tiered 
system with industry-standard servers running Windows NT on the 
application tier and NUMA-Q 2000 quads running UNIX on the database tier.  
The framework is integrated using Sequent's new ADAM (Advanced Detection 
Availability Manager) hardware, which provides the ability to monitor and 
control critical baseline functions of all NUMACenter devices.  Each 
release of NUMACenter is designed to ensure flexibility and minimize risk 
in the deployment of large enterprise applications by eliminating the need 
for customers to choose between UNIX and Windows NT.

Operating System Software 

  DYNIX/ptx.  DYNIX/ptx, Sequent's data-center-hardened version of the 
UNIX operating system, runs on Sequent's NUMACenter, NUMA-Q 2000 and NUMA-
Q 1000 systems.  DYNIX/ptx has several leading edge data center 
capabilities.  Application Region Manager(TM) enables users to partition 
systems into application regions, thus enabling workload management and 
server consolidation.  Multipath/multiport delivers mainframe-level 
functionality at the UNIX operating system level by providing up to eight 
active paths from a NUMA-Q system to a storage device.  Data is accessible 
through all paths, enabling high availability of NUMA-Q servers even if 
one or more paths fail. 

  Project Monterey.  In an effort to increase the number of software 
packages available on its platforms, Sequent has joined IBM, Intel and SCO 
in Project Monterey, an IBM initiative to develop an industry standard 64-
bit UNIX for Intel's IA-64 (Merced) microprocessor.  Based on IBM's AIX 
operating system, the new IA-64 UNIX is scheduled for delivery on Merced 
in the second half of 2000.  Several other companies, including Acer Inc., 
CETIA, Groupe Bull, ICL, Motorola, Inc. and Unisys Corporation, have 
already signed up with IBM as OEM partners of the new operating system.  
As a development partner, Sequent will contribute its NUMA technology expertise
and Intel experience in data center implementations to the project.

  As part of Project Monterey, the Company also plans to align 
DYNIX/ptx with SCO's 32-bit UnixWare and incorporate AIX features that 
will enable customers to run selected IBM software, including the 
DB2/Universal Database, on its 32-bit NUMA platforms.  Rebranded as 
UnixWare ptx Edition, this new 32-bit operating system will provide 
Sequent customers with a low-risk path to IA-64 UNIX.  Following the 
launch of Merced and IA-64 UNIX, Sequent plans to continue supporting 
UnixWare ptx Edition to leverage Intel's 32-bit processor roadmap.

  Windows NT.  Sequent has been a strong proponent of Microsoft Windows 
NT since it was first introduced in 1993.  Since then, Windows NT has 
become the platform of choice for thousands of enterprise applications.  
However, current versions lack the scalability to support large data 
center applications.  Sequent is working with Microsoft on Windows NT 
scalability and other data center capabilities for Sequent servers.  In 
1998, the Company opened an engineering center in Bellevue, Washington, 
dedicated to Windows NT development.  In addition, Sequent developed 
NUMACenter specifically to provide a flexible, low-risk data center 
platform that enables users to run Windows NT applications in a mixed 
environment that includes a large UNIX database.  The Company has also 
designed its mid-range NUMA-Q 1000 server to run either UNIX or Windows 
NT.

  FLEX-ES.  Sequent offers Fundamental Software Inc.'s FLEX-ES 
software, a UNIX application running under DYNIX/ptx that allows the 
mounting and execution of all S/390 and S/370 operating systems, data, and 
applications without modification.  This software enables organizations to 
re-host mainframe systems and applications off older hardware that is not 
Year 2000 compliant and onto Sequent's UNIX servers.
 
Communications Products 

  Sequent systems support communications products that allow NUMA-Q 
2000 systems to interconnect with other systems in multi-vendor system 
environments.  These products include hardware that connects to wide and 
local area networks (WANs and LANs) and software that supports industry 
standard protocols.
  
  In addition to supporting open systems protocols such as TCP/IP, Open 
Systems Interconnections (OSI) and X.25, Sequent products can communicate 
directly with IBM systems via Systems Network Architecture (SNA). 
 
  Sequent's NUMA-Q 2000 systems employ several high speed communications 
connections, including 100 Megabit-per-second Ethernet, CDDI (a copper wire 
version of FDDI), ATM and high speed Synchronous E1/T1, which offer an order 
of magnitude increase to the bandwidth of previous offerings.

Product Development
 
  Sequent's research and development programs are focused on advancing 
hardware and software technologies that strengthen the Company's core 
product and service offerings.  Sequent devotes substantial resources to 
ensure that its evolving technology roadmap is aligned with the technology 
direction of industry-leading vendors, such as IBM, Intel and Microsoft.  
Sequent engages in cooperative technology programs with these and other 
industry leaders, contributing Sequent's knowledge and expertise to the 
development of their products to optimize their performance with Sequent's 
own products.
 
  The Company is committed to making continued substantial investments 
in research and development activities to maintain and enhance its 
competitive position in a market characterized by rapid technological 
advances. 
 
Strategic Relationships with Leading Vendors
 
  Intel, IBM and Microsoft.  Sequent maintains strategic relationships 
with Intel for the development of the processor technology used in its 
NUMA architecture and with IBM for the development of operating system 
software designed to run on future Intel-based products.  Since 1987, the 
Company's close working relationship with Intel has enabled it to leverage 
Intel's research and development investment in the design of its own 
technology and to influence certain design features in successive 
generations of Intel microprocessors to optimize the performance of those 
components in the Company's systems.  During the fourth quarter of 1998, 
IBM selected Sequent as a co-developer in its Project Monterey initiative 
to develop an AIX-based version of UNIX for Intel's IA-64 (Merced) 
architecture.  Sequent's relationship with Microsoft is built around 
cooperative work on the scalability and other data center attributes of 
Windows NT, a strategically important component of the Company's 
technology roadmap.

  Fibre Channel and Storage Subsystems.  In 1997, Sequent was the first 
server vendor to support fibre channel switched fabric technology in a 
Storage Area Network (SAN) configuration.  This SAN utilizes Sequent's 
multipath/multiport technology within DYNIX/ptx, Brocade Communication 
Systems, Inc.'s fibre channel switch and storage devices such as disk 
subsystems and tape libraries.  Storage subsystems are supplied by leading 
storage vendors including EMC Corporation, Data General Corporation's 
("Data General") CLARiiON division, Hitachi Data Systems and Storage 
Technology Corporation.  Sequent works closely with these vendors to 
deliver optimal performance of the combined products to customers.
 
  Systems Management Software Products.  Sequent is implementing a 
standards-based systems management program that offers customers both 
flexibility and ease of integration.  Consolidation around systems 
management frameworks has led to the emergence of three de facto industry 
standard frameworks:  Computer Associates Unicenter TNG, Tivoli TME 10 and 
Hewlett-Packard Company's ("Hewlett-Packard") OpenView.  Sequent has 
relationships with all leading framework providers, offering native 
support for each partner's agent technology and providing a broad range of 
integrated products that address specific management disciplines. 

  Every NUMACenter framework ships with FacetCorp's FacetWin software 
which allows users of Windows to access and use UNIX network resources 
transparently. 
 
  Relational Database Management System (RDBMS) Software.  Sequent has 
strategic development and marketing relationships with major providers of 
RDBMS software, including Oracle, Informix and Microsoft.  The Company 
works closely with these partners to optimize the performance and 
scalability of their products for large OLTP and DSS/data warehousing 
applications.  Sequent cooperates with these partners in development 
programs, joint marketing programs and team sales efforts.  The Company 
has from time to time entered into agreements with various vendors that 
provide for prepayment of future licenses and royalties based on sales of 
software.  
 
  Enterprise Resource Planning Applications Software.  Sequent maintains 
strategic relationships with key providers of packaged ERP applications and 
development tools for custom client/server applications.  Packaged client/
server applications provide a standard pre-engineered solution for a common 
set of functional business problems.  Packaged ERP applications offer the 
potential to trim the total cost of a solution, reduce the time required for 
implementation and lower overall project risk.  Sequent maintains strategic 
relationships with several vendors of ERP applications, including Oracle, 
PeopleSoft, SAP and Baan.

  Decision Support System (DSS) Software and Tools.  Sequent maintains 
strategic relationships with the leading providers of OLAP (on-line analytical 
processing), database, query and reporting, campaign management, segmentation 
and modeling tools and applications.  These applications and tools support 
the decision-making process through analysis of information stored in 
relational databases.

  Packaged DSS applications provide a standard solution that supports the 
decision-making process by allowing organizations to organize data from a 
variety of sources and analyze it to measure the impact of business decisions 
and strategy.  Well-designed DSS applications use a data warehouse 
infrastructure that ensures cost-effective deployment and a single view of 
data across the enterprise.  Sequent maintains a number of strategic 
relationships with software partners providing DSS products, including 
Microstrategy, Prime Response, Exchange Applications, Unica, SAS and Siebel.

  In addition, Sequent has an interest in DP Applications ("DPA"), a 
packaged data warehouse application company.  DPA specializes in turnkey 
data warehouses running in concert with packaged ERP systems, specifically 
Oracle financials, PeopleSoft financials and HR and SAP.

  Sales, Marketing and Service Applications.  Sequent is aligned with the key
providers of packaged enterprise sales, marketing and service applications.  
Combined with large back-office DSS/data warehousing solutions, these 
applications deliver a cross-enterprise solution for improved customer 
relationship management.  Integrated sales, marketing and service applications
reduce the total cost of a solution and the time required for implementation 
and leverage a single customer database for more targeted sales and service.  
Sequent maintains strategic relationships with Siebel and Point Information 
Systems.  A large implementation of Sequent's NUMACenter framework also 
provides the Unix and Windows NT hardware infrastructure for SiebelNet, a new 
application outsourcing service from Siebel aimed at helping organizations 
accelerate the deployment of their sales, marketing and customer service 
applications and reduce and manage overall costs.

Professional Services

  During the past six years, Sequent has strengthened its ability to compete 
at the high end of the open systems market by building a professional services
organization with broad-based knowledge of open systems and specific knowledge
and expertise in the design, development and implementation of large-scale 
database applications.  Working directly with customers or together with SIs,
the Company's professional services consultants help organizations diagnose 
their information technology problems and design solutions that leverage the 
best open systems technology and are aligned with the customer's business 
strategy.

  Sequent offers a wide range of professional services designed to support the
customer through every phase of a project, from advance planning and 
architectural services to technology deployment and ongoing systems support.  
Professional services include:  IT architecture and transition planning; CRM 
solutions, including call center and DSS/data warehousing design and 
implementation; implementation of ERP applications (such as Oracle Financials 
& Manufacturing, Baan and PeopleSoft applications); and enterprise 
infrastructure design and systems administration.  In addition, Sequent offers 
customers education and training programs.

  Sequent's consulting and professional services capability has enabled 
Sequent to transform itself from a systems vendor into a provider of 
solution-oriented offerings.  Professional services add significant value 
to the Company's partnerships with SIs and are a key factor in Sequent's 
ability to win new major accounts and compete successfully for large 
projects.  Having professional services personnel on site in customer 
accounts also enables the Company to build customer relationships that 
result in a better understanding of the organization's IT needs and 
frequently lead to follow-on projects.

Customer Services

  Sequent's customer service organization offers customers an industry-
leading portfolio of data center support services that, when customized to 
customers' business and IT requirements, create total service solutions 
for business-critical computing.  These solutions were designed around a 
set of necessary core components:  system support services, environmental 
services, management support services and business protection services.

  System Support Services.  System support services form the cornerstone of 
Sequent's customer services and provide a high level of traditional hardware, 
software and network support.  These support services are available in a 
scalable range, which provides customers with the flexibility to choose levels 
of support based upon their need for risk management and system availability.  
In addition, hardware maintenance is offered for many third-party peripheral 
products connected to Sequent systems.  System support services can address 
support needs for installations ranging from a single system to an entire 
data center.

  Environmental Services.  Environmental services provide the first 
step in keeping systems on-line and users productive by making sure that 
data centers and office spaces are properly prepared to support sensitive 
electronic equipment.  Sequent's environmental services range from power 
audits and reviews to uninterruptible power systems, and even planning, 
designing and building a computer room.  Sequent delivers cost-effective 
solutions that optimize the reliability of a customer's IT infrastructure 
and help minimize the risks associated with environmental incidents.  

  Management Support Services.  Management support services provide the 
foundation for ensuring maximum productivity.  This flexible set of 
services helps customers manage disparate information technology processes 
and more effectively manage the day-to-day aspects of their IT operations.  
The services offered include help desk/call management, vendor management, 
remote system administration and flexible levels of account management.  
These services can be used to augment current resources or as a total 
service solution to support customer's IT operations. 

  Business Protection Services.  Business protection services provide 
critical components for keeping customers operational in the event of any 
unexpected outage or disaster.  Sequent's business protection services are 
designed to help plan and implement processes for protecting a customer's 
business investment.  The solutions include business continuity planning, 
disaster recovery services, security assessments, backup data verification 
and system replacement services.
     
  As Sequent believes that the quality and reliability of its computer 
systems are essential to customer satisfaction, high system uptime is a 
built-in advantage of Sequent's architecture.  The Company maintains 
round-the-clock technical consultation as well as remote log-in capability 
for diagnosing customer hardware and software problems.  In the event a 
hardware malfunction occurs, systems are equipped with diagnostic tools 
that allow the Company's service engineers to identify, diagnose and 
repair a failed component from remote locations.  In some cases, in-field 
hardware service is contracted to third-party suppliers who rely on 
Sequent for customer interface and diagnostic support.  

  Sequent has consistently been rated among the best providers of 
customer service in independent customer surveys.
 
Sales and Distribution

  Sequent sells its products and services worldwide through its own 
direct sales force and through SIs. In several countries in Europe, 
Asia-Pacific and elsewhere, the Company also relies on distributors with 
open systems expertise and a strong market presence.

  The Company's direct sales force is made up of sales teams, generally 
consisting of a major account executive ("MAE") and a systems analyst 
("SA").  MAEs have primary responsibility for managing the team's 
accounts; SAs provide technical support during the sales cycle.  The sales 
teams work closely with the Company's professional services organization 
to identify opportunities to leverage the Company's consulting and 
professional services capability in their accounts.
 
  Sequent has cooperative relationships with a number of SIs to sell 
its products and services into accounts where the Company does not have a 
strong market presence.  In the fourth quarter of 1998, the Company 
entered into a relationship with Siebel to deliver CRM solutions that 
integrate Siebel's front-office solutions with large back-office decision 
support solutions running on Sequent platforms.  The Company has a similar 
relationship with AABC and Oracle to develop and sell SolutionNOW, a set 
of rapid deployment packages for Oracle financials and manufacturing 
applications on Sequent platforms.

  For the past three years, Sequent has worked closely with EDS on a 
growing number of data center projects and outsourcing opportunities.  In 
January 1999, the Company transferred management of its internal IT 
infrastructure and operations to EDS, laying the groundwork for future 
joint marketing and sales efforts.

  In January 1999, the Company signed an agreement with Comparex, the 
parent company of SI PQA and Comparex International, one of Europe's 
fastest growing independent integrators.  The Company has had a successful 
working relationship with PQA in South Africa for many years and intends 
to apply the same selling model in those regions of Europe where it has 
been slow to replicate the success of its direct sales force in France and 
the United Kingdom.

  As of March 15, 1999, the Company has 56 sales offices worldwide, 
including 28 in North America, 15 in Europe and 13 in Asia Pacific.

Competition

  The computer industry is intensely competitive and characterized by 
rapid technological advances resulting in frequent new product 
introductions and correspondingly frequent improvements in performance and 
functionality.  Competitive factors related specifically to Sequent's 
business include product quality and reliability, professional services 
and customer support capability, price/performance and scalability, 
compatibility with a customer's existing IT infrastructure, availability 
of applications software and company size and reputation.

  Within the commercial segment of the computing market, Sequent 
competes against IBM, Hewlett-Packard, Sun Microsystems, Inc. ("Sun"), 
Compaq Computer Corporation and others whose size, reputation, installed 
base, technical expertise, marketing strength, distribution channels and 
financial resources make them formidable competitors.  Most of these 
companies also have large professional services organizations and 
alliances with many of the same hardware and software vendors with whom 
Sequent has strategic relationships.

  Sequent believes that the completeness of its technology roadmap, the 
performance and scalability of its products, the character and strength of 
its strategic relationships, and the caliber and scope of its consulting 
and professional services represent key differentiating factors that will 
enable it to compete successfully with these companies in the market for 
data center solutions.

Patents and Licenses
 
  The Company has fourteen U.S., one German, and three United Kingdom 
patents either issued or allowed.  The Company has twenty additional U.S. 
patent applications pending and one foreign application covering technology 
incorporated into its products.  The Company believes that the rapid pace of 
technological change in the computer industry makes patent protection less 
significant than factors such as its continued focus and efforts in research 
and product development, its technical expertise and the management ability 
of its personnel.  The Company has from time to time been made aware of others 
in the industry who assert exclusive rights to certain technologies, copyrights 
or trademarks, usually in the form of an offer to license certain rights for 
a fee or royalties.  The Company's policy is to evaluate such claims on a 
case-by-case basis.  The Company may seek to enter into licensing agreements 
with companies having or asserting rights to technologies if the Company 
concludes that such licensing arrangements are necessary or desirable.  There 
can be no assurance that the Company will be able to obtain such licenses or, 
if obtained, that such licenses will be on favorable terms.

Employees
 
  At January 2, 1999, the Company employed 2,646 employees of whom 216 
were employed as major account executives, 1,601 in sales support, 
marketing and service, 423 in product development, 219 in manufacturing 
and 187 in administrative and support services.  The Company's continued 
success will depend in part on its ability to attract and retain highly 
skilled and motivated personnel who are in great demand throughout the 
industry. None of the Company's employees are represented by a labor 
union.  Sequent believes that its employee relations are excellent and 
believes that its stock incentive plans, its challenging work environment 
and the opportunities for advancement within the Company are key factors 
to its ability to attract and retain qualified personnel.
 

Trademarks

  Sequent(R), Symmetry(R), WinServer(R), Balance(R), DYNIX(R), DYNIX/ptx(R), 
PTX(R)and ptx/ADMIN(R) are registered trademarks and NUMA-Q(TM), 
NUMACenter(TM), IQ-Link(TM), NTX2000(TM), Decision Advantage(TM), Contact 
Advantage(TM), Application Advantage(TM) and Application Region Manager(TM) 
are trademarks of Sequent Computer Systems, Inc.  This Report on Form 10-K 
also refers to trademarks held by other corporations.

Factors That May Affect Future Results

  Information in this Annual Report on Form 10-K that is not historical 
information, including information regarding product development schedules 
and anticipated benefits from new products and from the Project Monterey 
relationship with IBM constitutes forward-looking statements that involve 
a number of risks and uncertainties.  Additional forward-looking statements 
may be made by the Company from time to time.  The following factors are 
among the factors that could cause actual results to differ materially from 
the forward-looking statements.  Any forward-looking statements should be 
considered in light of these factors.  The Company's forward-looking statements
apply only as of the date made.  The Company undertakes no obligation to 
publicly release the results of any revision to these forward-looking 
statements which may be made to reflect events or circumstances after the date
made or to reflect the occurrence of unanticipated events.

  Fluctuations in Quarterly Results.  The Company's results of operations 
have fluctuated significantly from period to period, including on a quarterly 
basis.  A significant portion of the Company's products are shipped in the 
quarter in which the orders are received.  Order backlog as of any quarter-end
is normally shipped within the first few weeks of the succeeding quarter.  As 
a result, order backlog as of the end of February for both 1999 and 1998 was 
relatively small.  As is the case with many high technology companies, a 
disproportionately large percentage of a quarter's total sales occur in the 
last month and weeks and days of such quarter.  The Company's quarterly sales 
and operating results, therefore, depend in large part on the volume and 
timing of orders received during the quarter, which are difficult to forecast.  
Accordingly, the Company may be unable to adjust spending in a timely manner 
to compensate for any unexpected revenue shortfall.  As a result, any 
significant shortfall in demand for the Company's products and services in 
relation to the Company's expectations could have an immediate material adverse
effect on the Company's business, operating results and financial condition.  
Further, as the Company's sales to major accounts continue to increase, the 
Company expects that a limited number of large sales may account for a more 
significant portion of revenue in some quarters, creating greater exposure 
to possible fluctuations in revenue.  In addition, larger orders typically 
involve substantially longer selling cycles, which makes quarterly forecasts of 
sales more difficult.

  The Company may experience significant fluctuations in future quarterly 
operating results that may be caused by many factors, including demand for 
the Company's products, introduction or enhancement of products by the Company 
or its competitors, market acceptance of new products, the timing of sales to 
large accounts, pricing pressures, the mix of products sold and the mix between 
product and service revenue, lengthy sales cycles, capital spending levels by 
customers, shipment interruptions due to quality problems and general 
economic conditions.  Because of all of the foregoing factors, it is possible 
that in some future quarters the Company's operating results will be below the 
expectations of securities analysts or investors.  In such event, the market 
price of the Company's Common Stock could be materially adversely affected. 

  Competition.  The computer business is intensely competitive.  The 
Company competes with a number of companies that have considerably greater 
financial, marketing, technical and operating resources.  The Company 
competes with, among others, Hewlett-Packard, Digital, IBM and Sun, which 
have large installed customer bases in many of the markets addressed by 
the Company.  All of these companies offer products that compete with 
Sequent's products.  Silicon Graphics, Inc. and Data General have already 
introduced products based on CC-NUMA technology and other companies are 
believed to be developing products based on CC-NUMA technology.  Most also 
have large professional services organizations and alliances with many 
hardware and software vendors with which Sequent has strategic 
relationships.  No assurances can be given that the Company will have the 
financial resources, marketing, distribution and service organizations, 
technical capabilities or depth of key personnel necessary to compete 
successfully in the future.

  Product Development.  The computer industry is subject to rapid and 
significant technological change and frequent introductions of new 
competitive products.  To remain competitive, the Company will be required 
to continue to invest substantially in research and development, enhance 
its existing products, introduce new competitive products and maintain 
price/performance advantages in its selected markets.  New product 
development may be delayed or unsuccessful due to technical difficulties 
encountered or resource constraints.  There can be no assurance that it 
will be able to respond adequately to unexpected technological changes in 
its markets or that future products will be completed on schedule or will 
be successful.

  Strategic Relationships.  The Company has developed strategic 
relationships with leading hardware and software providers and is engaged 
in joint research and product development and marketing arrangements with 
these companies.  The Company's ability to enhance its existing NUMA-Q 
products and develop new products is significantly dependent on 
maintaining and strengthening the Company's relationships with leading 
providers, particularly Intel, Microsoft, Oracle and IBM.  Many of these 
hardware and software vendors also have significant development and 
marketing relationships with the Company's competitors.  In addition, the 
Company's relationships with systems integrators, including EDS and AABC 
and Comparex, are increasingly important to the Company's business 
strategy.  The Company plans to continue its strategy of developing 
technology and marketing relationships with these and other leading 
hardware and software vendors and systems integrators.  There can be no 
assurance that the Company will be successful in its ongoing strategic 
relationships or that the Company will be able to find additional suitable 
business relationships as it develops new products.  Any failure to 
continue or expand such relationships could have a material adverse effect 
on the Company's business, operating results and financial condition.  
There can be no assurance that the Company's strategic partners, most of 
which have significantly greater financial and marketing resources than 
the Company, will not develop and market products in competition with the 
Company in the future, discontinue their relationships with the Company or 
form or strengthen arrangements with the Company's competitors. 

  Software Development and OEM Relationship with IBM Corporation.  The 
Company has joined IBM, Intel and SCO in Project Monterey, an IBM 
initiative to develop an industry standard 64-bit UNIX for Intel's IA-64 
(Merced) microprocessor.  Several other companies, including Acer Inc., 
CETIA, Groupe Bull, ICL, Motorola, Inc. and Unysis Corporation, have 
already signed up with IBM as OEM partners of the new operating system.  
There can be no assurance, however, that the software development will be 
timely and successful or that the companies mentioned above will 
successfully OEM the product.

  Supply of Components.  Certain components used by the Company, including 
Intel microprocessors, custom VLSI gate arrays and intelligent high-speed 
data switches (IQ-Link), are only available from single sources.  The Company 
attempts to reduce the risk of supply interruption through greater inventory 
positions in sole-source components.  Other components, such as memory chips, 
have occasionally been in short supply throughout the industry.  Failure to 
obtain sole-source or other parts and components in adequate quantities on a 
timely basis could increase costs or delay shipments and have an adverse 
effect on the Company's revenues and net income.  The adverse effect of a 
supplier's failure to meet Sequent's requirements may be intensified by the 
fact that a large portion of orders are received, and the products shipped, 
at the end of a quarter. 

  Capitalization of Software Development Costs.  The Company has made 
and continues to make significant investments in software development.  
The amount of expenditures that qualify for capitalization under Statement 
of Financial Accounting Standards No. 86 "Accounting for the Costs of 
Computer Software to Be Sold, Leased, or Otherwise Marketed" may vary 
from period to period as software projects progress through the 
development life-cycle.  These variations could impact the Company's 
operating results in any given period.  Unamortized software development 
costs were approximately $72.5 million at January 2, 1999.  If 
technological developments or other factors were to jeopardize the 
realizability of such assets, the Company could be required to write off 
all or a substantial portion of such capitalized values, which could have 
a material adverse effect on the Company's results of operations for the 
period in which the write-off occurs. 

  Year 2000 Compliance.  The Year 2000 Issue is the result of computer 
programs being written using two digits rather than four to define the 
applicable year.  Any of the Company's software programs and microcircuitry 
that have date-sensitive features may recognize a date using "00" as the year 
1900 rather than the year 2000.  This could result in a system failure or 
miscalculations causing disruptions of operations.  The Year 2000 Issue 
affects the Company's internal systems as well as any of the Company's 
products that include date-sensitive software.  The Company is executing a 
company-wide Year 2000 Readiness Program for the Company's products, on-going 
operations, mission-critical information systems and key suppliers.  Both 
internal and external resources are being employed to identify, correct, or 
reprogram, and test the systems for Year 2000 compliance.  The total cost of 
the project is currently estimated to be approximately $10 million and is 
being funded through operating cash flows.  The Company is expensing all costs 
associated with identification and resulting changes to these systems, but 
does not expect the amounts to have a material effect on its financial 
position or results of operations.  There can be no assurance, however, 
that the systems or products of other companies on which the Company's 
systems also rely will be timely converted or that any such failure to 
convert by a vendor, customer or another company would not have an adverse 
effect on the Company's systems.  Additionally, we cannot completely 
ensure that the Company's software products do not contain undetected 
problems associated with Year 2000 compliance.  Such problems, should they 
occur, may result in adverse effects on future operating results.  

  Uncertain Protection of Intellectual Property.  The Company's success 
and ability to compete is dependent in part upon its internally developed 
technology.  While the Company relies on patent, trademark, trade secret 
and copyright law to protect its technology, the Company believes that 
factors such as the technological and creative skills of its personnel, 
new product developments, frequent product enhancements, name recognition 
and reliable product maintenance are more essential to establishing and 
maintaining a technology leadership position.  There can be no assurance 
that others will not develop technologies that are similar or superior to 
the Company's technology.  The Company generally enters into 
confidentiality or license agreements with its employees, consultants and 
vendors and generally seeks to control access to and distribution of its 
proprietary information.  Despite these precautions, it may be possible 
for a third party to copy or otherwise obtain and use the Company's 
products or technology without authorization, or to develop similar 
technology independently.  There can be no assurance that the steps taken 
by the Company will prevent misappropriation of its technology or that 
such confidentiality and license agreements will be enforceable.

  Periodically, the Company has received, and may receive in the 
future, notices of claims of infringement of other parties' proprietary 
rights.  Although the Company does not believe that its products infringe 
the proprietary rights of any third parties, there can be no assurance 
that infringement or invalidity claims (or claims for indemnification 
resulting from infringement claims) will not be asserted or prosecuted 
against the Company or that any such assertions or prosecutions (including 
the costs of litigation) will not materially adversely affect the 
Company's business, operating results and financial condition.  If any 
claims or actions are asserted against the Company, the Company may seek 
to license a third party's intellectual property rights.  There can be no 
assurance, however, that under such circumstances, a license would be 
available on reasonable terms or at all. 

  Availability of Key Personnel; Expansion of Sales Force.  The 
Company's continued growth depends upon its ability to attract, integrate 
and retain qualified management, technical and sales and support personnel 
for its operations. Competition for sales personnel is intense, and the 
Company may find it difficult to attract such personnel in a timely and 
efficient manner or to retain and integrate such personnel.  This 
competition could adversely affect the Company's ability to expand and 
manage its sales force to sell its NUMA-Q products and professional 
services to large accounts and to develop marketing relationships with 
large SIs. 

  Manufacturing Risks.  The Company's products are designed and 
manufactured for high reliability.  If flaws in design, production, 
assembly or testing occur on the part of Sequent or its suppliers, Sequent 
may experience a rate of failure in its products that results in 
substantial repair or replacement costs and potential damage to its 
reputation.  There can be no assurance that Sequent's efforts to monitor, 
develop and implement appropriate test and manufacturing processes for its 
products will be sufficient to permit Sequent to avoid a rate of failure 
in its products that results in substantial delays in shipment, 
significant repair or replacement costs and potential damage to Sequent's 
reputation, any of which could have a material adverse effect on Sequent's 
business, operating results and financial condition. 

  International Operations.  The Company derived 52% of its total 
revenues from foreign customers in the year ended January 2, 1999, a 
substantial portion of which was denominated in currencies other than U.S. 
dollars.  Most of the Company's international sales are in Europe.  
International operations are subject to various risks, including exposure 
to currency fluctuations, the greater difficulty of administering business 
abroad and the need to comply with a wide variety of international and 
United States export laws and regulatory requirements.

  Volatility of Stock Prices.  There has been a history of significant 
volatility in the market prices of the Common Stock of electronics 
companies, including that of the Company, and it is likely that the market 
price of the Company's Common Stock will continue to be subject to 
significant fluctuations.  Factors such as the timing and market 
acceptance of new product introductions by the Company, the introduction 
of new products by the Company's competitors, variations in quarterly 
operating results, changes in securities analysts' recommendations 
regarding the Company's Common Stock, developments in the electronics 
industry and general economic conditions may have a significant impact on 
the market price of the Company's Common Stock.  In addition, the equity 
markets in recent years have experienced significant price and volume 
fluctuations that have affected the market prices of technology companies 
and that have often been unrelated to the operating performance of such 
companies. 

Item 2.    Properties.

  The Company's headquarters and its product development and manufacturing 
operations are located in facilities totaling approximately 670,000 square 
feet in Beaverton, Oregon, 10 miles west of Portland.  The Company occupies 
these facilities under leases which expire from 1999 to 2006.  On the 
expiration dates of these leases, the Company generally has the option of 
purchasing the leased facilities at fair market value or renewing the leases 
for an additional five years.  In addition, the Company owns 31 acres of 
undeveloped land in Beaverton held in anticipation of future facility growth 
requirements.  The Company also leases for sales, marketing and customer 
support offices in locations throughout the United States, Europe, Canada and 
Asia Pacific.  The Company anticipates that it will continue to expand its 
corporate and field facilities as business growth warrants.

Item 3.    Legal Proceedings.

  There are no material pending legal proceedings involving the 
Company.

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

  Not applicable.

Item 4(a). Executive Officers of the Registrant.

Executive Officers of the Company as of March 15, 1999 are as follows:

Name                   Age     Position

Karl C. Powell, Jr.     55     Chairman and Chief Executive Officer, Director
John McAdam             48     President and Chief Operating Officer, Director
Robert S. Gregg         45     Sr. Vice President of Finance and Legal
                                 and Chief Financial Officer
Barbara L. Gaffney      49     Sr. Vice President of Business Programs


  Mr. Powell, a co-founder of the Company, is Chairman and Chief 
Executive Officer, and has been a director since 1983.  Mr. Powell has 
served as the Company's sole Chief Executive Officer or shared the Office 
of the Chief Executive with the co-founder of the Company since the 
Company's inception.  From 1974 to 1983, Mr. Powell was employed by Intel 
Corporation, where his most recent position was General Manager for 
Microprocessor Operations.  Mr. Powell served on the National Board of 
Directors of the American Electronics Association from 1985 to 1986.  He 
holds a B.S. degree in mechanical engineering from the US Merchant Marine 
Academy.

  Mr. McAdam joined the Company in August 1989 as U.K. Sales Director.  
He became U.K. General Manager in January 1991, Vice President and General 
Manager of European Operations in October 1992, and Senior Vice President 
of European and Asian Operations in January 1994.  He was promoted to 
President and Chief Operating Officer in February 1995, and was elected to 
the Board of Directors in November 1995.  Prior to joining the Company Mr. 
McAdam was employed for 10 years by Data General U.K. Ltd., serving most 
recently as Regional Manager, Public Sector, Finance and Government 
Market.  Mr. McAdam holds a B.Sc. first class honors degree in Computer 
Sciences from Glasgow University.

  Mr. Gregg joined the Company in 1983 as its Controller.  He became 
Director of Finance in 1984 and Vice President of Finance and Chief 
Financial Officer in March 1986.  He was promoted to Senior Vice President 
of Finance and Legal and Chief Financial Officer in February 1995.  Prior 
to joining the Company, Mr. Gregg spent eight years at the public 
accounting firm of Price Waterhouse LLP.  Mr. Gregg holds a B.S. degree in 
business and accounting from the University of Oregon.

  Ms. Gaffney joined the Company in 1983 as Vice President of Human 
Resources.  She then took on the role of Vice President of Quality in 1992 
and in 1996 she was promoted to Senior Vice President of Customer Services 
and Quality.  Early in 1999, she was promoted to Senior Vice President of 
Business Programs.  Prior to joining the Company, Ms. Gaffney spent eleven 
years with Intel Corporation in various Human Resources management 
positions in both California and Oregon.  Ms. Gaffney holds a B.S. degree 
from the University of Santa Clara.  She is also a member of the Malcolm 
Baldridge National Quality Award (MBNQA) Board of Examiners.    


                                PART II

Item 5.    Market for the Registrant's Common Equity and Related 
           Stockholder Matters.
           The information required by this item is included under "Market 
           Information (unaudited)" in the Company's 1998 Annual Report to 
           Shareholders and is incorporated herein by reference.

Item 6.    Selected Financial Data.
           Information with respect to selected financial data is included 
           under "Selected Financial Data" in the Company's 1998 Annual Report 
           to Shareholders and is incorporated herein by reference.

Item 7.    Management's Discussion and Analysis of Financial Condition and 
           Results of Operations.
           Information with respect to management's discussion and analysis of 
           financial condition and results of operations is included under 
           "Management's Discussion and Analysis of Financial Condition and 
           Results of Operations" in the Company's 1998 Annual Report to 
           Shareholders and is incorporated herein by reference.

Item 7(a). Quantitative and Qualitative Disclosures About Market Risk 
           Information with respect to quantitative and qualitative disclosures 
           about market risk is included under "Derivatives and Other 
           Financial Instruments" under "Management's Discussion and 
           Analysis of Financial Condition and Results of Operations" in 
           the Company's 1998 Annual Report to Shareholders and is 
           incorporated herein by reference.
     
Item 8.    Financial Statements and Supplementary Data.
           Information with respect to selected quarterly financial data is 
           included under "Quarterly Financial Data (unaudited)" in the 
           Company's 1998 Annual Report to Shareholders and is incorporated 
           herein by reference.  The other information required by this item 
           is included under "Consolidated Financial Statements" and 
           "Notes to Consolidated Financial Statements" as listed in item 
           14 of this report and in the Company's 1998 Annual Report to 
           Shareholders which is incorporated herein by reference.

Item 9.    Changes in and Disagreements with Accountants on Accounting 
           and Financial Disclosure.
           Not applicable.


                               PART III

Item 10.   Directors and Executive Officers of the Registrant.
           Information with respect to directors of the Company will be 
           included under "Election of Directors" in the Company's Proxy 
           Statement for its 1999 Annual Meeting of Shareholders and is 
           incorporated herein by reference.  Information with respect to 
           executive officers of the Company is included under Item 4(a) of 
           Part I of this Report.

Item 11.   Executive Compensation.
           Information with respect to executive compensation will be included 
           under "Summary Compensation Table", "Stock Option Grants in Last 
           Fiscal Year", "Stock Option Exercises in Last Fiscal Year and 
           Fiscal Year End Option Values" and under "Executive Compensation," 
           and "Certain Transactions" in the Company's Proxy Statement for its 
           1999 Annual Meeting of Shareholders and is incorporated herein by 
           reference.

Item 12.   Security Ownership of Certain Beneficial Owners and Management.
           Information with respect to security ownership of certain beneficial 
           owners and management will be included under "Voting Securities 
           and Principal Shareholders" and "Election of Directors" in the 
           Company's Proxy Statement for its 1999 Annual Meeting of 
           Shareholders and is incorporated herein by reference.

Item 13.   Certain Relationships and Related Transactions.
           Information with respect to transactions with management will be 
           included under "Certain Transactions" in the Company's Proxy 
           Statement for its 1999 Annual Meeting of Shareholders and is 
           incorporated herein by reference.



                                PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)(1)     Financial Statements.

           The following financial statements are included in the Company's 
           1998 Annual Report to Shareholders:

     
Sequent Computer Systems, Inc. and Subsidiaries:

Consolidated Statements of Operations - Fiscal Years Ended January 2, 
1999, January 3, 1998 and December 28, 1996 

Consolidated Balance Sheets - January 2, 1999 and January 3, 1998

Consolidated Statements of Shareholders' Equity - Fiscal Years Ended 
January 2, 1999, January 3, 1998 and December 28, 1996

Consolidated Statements of Cash Flows  - Fiscal Years Ended January 2, 
1999, January 3, 1998 and December 28, 1996 

Notes to Consolidated Financial Statements     

Report of Independent Accountants     

(a)(2)     Financial Statement Schedules.

           The following schedule and report of independent accountants are 
           filed herewith:

                                                           Page in this report
                                                              on Form 10-K

Schedule II     Valuation and Qualifying Accounts                    F-1

Report of Independent Accountants on Financial Statement Schedules   F-2


All other schedules are omitted as the required information is inapplicable 
or is presented in the financial statements or related notes thereto.


(a)(3)   Exhibits.

  Exhibit
  Number                           Description

   3.1     Articles of Incorporation, as amended, and Articles of Merger 
           of Sequent Computer Systems, Inc. (the "Company").  (Incorporated 
           by reference to Exhibit 4A to the Company's Registration Statement 
           on Form S-8 (File no. 33-63972).)

   3.2     Bylaws, as amended, of the Company.  (Incorporated by reference to 
           Exhibit 4B to the Company's Registration Statement on Form S-8 
           (File no. 33-39315).)

   4.1     Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company 
           agrees to furnish any other long term debt agreements to the 
           Commission upon request.

  10.1A    Amended and Restated Lease Agreement between KC Woodside and the 
           Company, as amended, dated May 8, 1987 ("First Building Lease"), 
           and related agreements.  (Incorporated by reference to Exhibit 19.1 
           to the Company's Quarterly Report on Form 10-Q for the quarter ended 
           July 4, 1987 (File no. 0-15627).)

  10.1B    Second Amendment to First Building Lease, dated July 28, 1988.  
           (Incorporated by reference to Exhibit 10.3B to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 30, 1989 
           (File no. 0-15627).)

  10.1C    Third Amendment to First Building Lease, dated July 28, 1989.  
           (Incorporated by reference to Exhibit 10.3C to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 30, 1989 
           (File no. 0-15627).)

  10.1D    Fourth Amendment to First Building Lease, dated September 20, 1991.  
           (Incorporated by reference to Exhibit 10.1D to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 28, 1991 
           (File no. 0-15627).)

  10.1E    Fifth Amendment to First Building Lease, dated December 2, 1992.  
           (Incorporated by reference to Exhibit 10.1E to the Company's Annual 
           Report on Form 10-K for fiscal year ended January 2, 1993 (File 
           no. 0-15627).)

  10.1F    Sixth Amendment to First Building Lease, dated April 5, 1993. 
           (Incorporated by reference to Exhibit 10.1F to the Company's Annual 
           Report on Form 10-K for the fiscal year ended January 1, 1994 
           (File no. 0-15627).)

  10.1G    Seventh Amendment to First Building Lease, dated September 30, 1997.
           (Incorporated by reference to Exhibit 10.1G to the Company's Annual 
           Report on Form 10-K for the fiscal year ended January 3, 1998 
           (File no. 0-15627).)

  10.1H    Eighth Amendment to First Building Lease, dated March 26, 1998.
     
  10.1I    Lease Agreement between KC Woodside and the Company, dated May 8, 
           1987 ("Second Building Lease").  (Incorporated by reference to 
           Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q for 
           the quarter ended July 4, 1987 (File no. 0-15627).)

  10.1J    First Amendment to Second Building Lease, dated July 28, 1988.  
           (Incorporated by reference to Exhibit 10.3E to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 30, 1989 
           (File no. 0-15627).)

     
 Exhibit
  Number                            Description

  10.1K    Second Amendment to Second Building Lease, dated September 13, 1991.
           (Incorporated by reference to Exhibit 10.1G to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 28, 1991 
           (File  no. 0-15627).)

  10.1L    Third Amendment to Second Building Lease, dated December 2, 1992.  
           (Incorporated by reference to Exhibit 10.1L to the Company's Annual 
           Report on Form 10-K for fiscal year ended January 2, 1993 (File 
           no. 0-15627).)

  10.1M    Fourth Amendment to Second Building Lease, dated April 5, 1993. 
           (Incorporated by reference to Exhibit 10.1K to the Company's Annual 
           Report on Form 10-K for the fiscal year ended January 1, 1994 (File 
           no. 0-15627).)

  10.1N    Fifth Amendment to Second Building Lease, dated September 30, 1997.  
           (Incorporated by reference to Exhibit 10.1M to the Company's Annual 
           Report on Form 10-K for the fiscal year ended January 3, 1998 (File 
           no. 0-15627).)

  10.1O    Sixth Amendment to Second Building Lease, dated March 26, 1998.

  10.1P    Seventh Amendment to Second Building Lease, dated April 2, 1998.

  10.1Q    Lease Agreement, dated July 28, 1988 between KC Woodside and the 
           Company ("Third Building Lease").  (Incorporated by reference to 
           Exhibit 10.3F to the Company's Annual Report on Form 10-K for the 
           fiscal year ended December 30, 1989 (File no. 0-15627).)

  10.1R    First Amendment to Third Building Lease, dated July 28, 1989.  
           (Incorporated by reference to Exhibit 10.3G to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 30, 1989 
           (File no. 0-15627).)

  10.1S    Second Amendment to Third Building Lease, dated September 13, 1991.  
           (Incorporated by reference to Exhibit 10.1J to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 28, 1991 
           (File no. 0-15627).)

  10.1T    Third Amendment to Third Building Lease, dated December 2, 1992.  
           (Incorporated by reference to Exhibit 10.1M to the Company's Annual 
           Report on Form 10-K for fiscal year ended January 2, 1993 (File 
           no. 0-15627).)

  10.1U    Fourth Amendment to Third Building Lease, dated April 5, 1993. 
           (Incorporated by reference to Exhibit 10.1P to the Company's Annual 
           Report on Form 10-K for the fiscal year ended January 1, 1994 (File 
           no. 0-15627).)

  10.1V    Fifth Amendment to Third Building Lease, dated September 30, 1997.  
           (Incorporated by reference to Exhibit 10.1S to the Company's Annual 
           Report on Form 10-K for the fiscal year ended January 3, 1998 (File 
           no. 0-15627).

  10.1W    Sixth Amendment to Third Building Lease, dated March 26, 1998.

  10.1X    Lease Agreement, dated July 28, 1989 between KC Woodside and the 
           Company ("Fourth Building Lease").  (Incorporated by reference to 
           Exhibit 10.3H to the Company's Annual Report on Form 10-K for the 
           fiscal year ended December 30, 1989 (File no. 0-15627).)



  Exhibit
   Number                         Description

  10.1Y    First Amendment to Fourth Building Lease, dated September 13, 1991.  
           (Incorporated by reference to Exhibit 10.1P to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 28, 1991 
           (File no. 0-15627).)
     
  10.1Z    Second Amendment to Fourth Building Lease, dated August 13, 1992.  
           (Incorporated by reference to Exhibit 10.1P to the Company's Annual 
           Report on Form 10-K for fiscal year ended January 2, 1993 (File no. 
           0-15627).)

  10.1aa   Third Amendment to Fourth Building Lease, dated December 2, 1992.  
           (Incorporated by reference to Exhibit 10.1Q to the Company's Annual 
           Report on Form 10-K for fiscal year ended January 2, 1993 (File no. 
           0-15627).)

  10.1bb   Fourth Amendment to Fourth Building Lease, dated April 5, 1993. 
           (Incorporated by reference to Exhibit 10.1U to the Company's Annual 
           Report on Form 10-K for fiscal year ended January 1, 1994 (File 
           no. 0-15627).)

  10.1cc   Fifth Amendment to Fourth Building Lease, dated September 30, 1997.  
           (Incorporated by reference to Exhibit 10.1Y to the Company's Annual 
           Report on Form 10-K for the fiscal year ended January 3, 1998 (File 
           no. 0-15627).)  

  10.1dd   Sixth Amendment to Fourth Building Lease, dated March 26, 1998.

  10.1ee   Triple Net Lease, dated July 9, 1990 between KC Woodside and the 
           Company ("Fifth Building Lease").  (Incorporated by reference to 
           Exhibit 19 to the Company's Quarterly Report on Form 10-Q for the 
           quarter ended September 29, 1990 (File no. 0-15627).)

  10.1ff   First Amendment to Fifth Building Lease, dated April 29, 1991.  
           (Incorporated by reference to Exhibit 10.1N to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 28, 1991 
           (File no. 0-15627).)

  10.1gg   Second Amendment to Fifth Building Lease, dated April 29, 1991.  
           (Incorporated by reference to Exhibit 10.1O to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 28, 1991 
           (File no. 0-15627).)

  10.1hh   Third Amendment to Fifth Building Lease, dated June 10, 1991.  
           (Incorporated by reference to Exhibit 10.1P to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 28, 1991 
           (File no. 0-15627).)

  10.1ii   Fourth Amendment to the Fifth Building Lease, dated July 3, 1991.  
           (Incorporated by reference to Exhibit 10.1Q to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 28, 1991 
           (File no. 0-15627).)

  10.1jj   Fifth Amendment to Fifth Building Lease, dated September 13, 1991.  
           (Incorporated by reference to Exhibit 10.1R to the Company's Annual 
           Report on Form 10-K for the fiscal year ended December 28, 1991 
           (File no. 0-15627).)

  10.1kk   Sixth Amendment to Fifth Building Lease, dated December 2, 1992.  
           (Incorporated by reference to Exhibit 10.1X to the Company's Annual 
           Report on Form 10-K for fiscal year ended January 2, 1993 (File 
           no. 0-15627).)



  Exhibit
   Number                            Description

  10.1ll   Seventh Amendment to Fifth Building Lease, dated April 5, 1993. 
           (Incorporated by reference to Exhibit 10.1cc to the Company's 
           Annual Report on Form 10-K for fiscal year ended January 1, 1994 
           (File no. 0-15627).)

  10.1mm   Eighth Amendment to Fifth Building Lease, dated March 26, 1998.

  10.1nn   Lease Agreement between KC Woodside and the Company, dated June 10, 
           1991 (Umpqua).  (Incorporated by reference to Exhibit 10.1Y to the 
           Company's Annual Report on Form 10-K for fiscal year ended 
           January 2, 1993 (File no. 0-15627).)

  10.1oo   First Amendment to Lease, dated March 26, 1998 (Umpqua).

  10.1pp   Lease Agreement between KC Woodside and the Company, dated June 10, 
           1991 (Charles).  (Incorporated by reference to Exhibit 10.1Z to the 
           Company's Annual Report on Form 10-K for fiscal year ended January 2,
           1993 (File no. 0-15627).)

  10.1qq   First Amendment to Lease, dated October 31, 1991 (Charles).  
           (Incorporated by reference to Exhibit 10.1aa to the Company's 
           Annual Report on Form 10-K for fiscal year ended January 2, 1993 
           (File no. 0-15627).)

  10.1rr   Second Amendment to Lease, dated May 6, 1992 (Charles).  
           (Incorporated by reference to Exhibit 10.1bb to the Company's 
           Annual Report on Form 10-K for fiscal year ended January 2, 1993 
           (File no. 0-15627).)
     
  10.1ss   Third Amendment to Lease, dated January 8, 1993 (Charles).  
           (Incorporated by reference to Exhibit 10.1cc to the Company's 
           Annual Report on Form 10-K for fiscal year ended January 2, 1993 
           (File no. 0-15627).)

  10.1tt   Fourth Amendment to Lease, dated July 21, 1995 (Charles).  
           (Incorporated by reference to Exhibit 10.1dd to the Company's Annual 
           Report on 10-K for fiscal year ended January 2, 1993 (File no. 
           0-15627).)

  10.1uu   Fifth Amendment to Lease, dated March 26, 1998 (Charles).

  10.1vv   Lease Agreement between KC Woodside and the Company, dated June 10,
           1991 (South Platte). (Incorporated by reference to Exhibit 10.1dd 
           to the Company's Annual Report on Form 10-K for fiscal year ended 
           January 2, 1993 (File no. 0-15627).)

  10.1ww   First Amendment to Lease, dated July 21, 1995 (South Platte).  
           (Incorporated by reference to Exhibit 10.1ee to the Company's 
           Annual Report on Form 10-K for fiscal year ended January 2, 1993 
           (File no. 0-15627).)

  10.1xx   Second Amendment to Lease, dated March 1, 1997 (South Platte).  
           (Incorporated by reference to Exhibit 10.1rr to the Company's 
           Annual Report on Form 10-K for fiscal year ended January 3, 1998 
           (File no. 0-15627).)

  10.1yy   Third Amendment to Lease, dated March 26, 1998 (South Platte).

  10.1zz   Lease Agreement between KC Woodside and the Company, dated 
           January 15, 1996 (Guadalupe) as amended February 1, 1996 and 
           October 1, 1996.  (Incorporated by reference to Exhibit 10.1pp to 
           the Company's Annual Report on Form 10-K for fiscal year ended 
           December 18, 1996 (File no. 0-15627).)

  Exhibit
   Number                           Description

  10.1aaa  First Amendment to Lease, dated May 12, 1992 (Guadalupe). 
           (Incorporated by reference to Exhibit 10.1ff to the Company's 
           Annual Report on Form 10-K for fiscal year ended January 2, 1993 
           (File no. 0-15627).)

  10.1bbb  Second Amendment to Lease, dated July 21, 1995 (Guadalupe).  
           (Incorporated by reference to Exhibit 10.gg to the Company's 
           Annual Report on Form 10-K for fiscal year ended January 2, 1993 
           (File no. 0-15627).)

  10.1ccc  Third Amendment to Lease, dated March 26, 1998 (Guadalupe).

  10.1ddd  Business Park Lease between KC Woodside and the Company, dated 
           June 10, 1991 (Hillsborough). (Incorporated by reference to 
           Exhibit 10.1gg to the Company's Annual Report on Form 10-K for 
           fiscal year ended January 2, 1993 (File no. 0-15627).)

  10.1eee  First Amendment to Lease, dated March 26, 1998 (Hillsborough).

  10.2     Master Software License Agreement between Unix System Laboratories,
           Inc. (formerly owned by American Telephone & Telegraph Company) 
           and the Company, dated effective as of April 18, 1985. 
           (Incorporated by reference to Exhibit 10.2 to the Company's Annual
           Report on Form 10-K for fiscal year ended January 2, 1993 (File 
           no. 0-15627).)

  10.2A    Sublicensing Agreement between Unix Systems Laboratories, Inc. and 
           the Company, dated January 28, 1986, as amended June 22, 1987 and 
           August 10, 1987. (Incorporated by reference to Exhibit 10.2A to the
           Company's Annual Report on Form 10-K for fiscal year ended January 2,
           1993 (File no. 0-15627).)

  10.2B    Substitution Agreement between Unix System Laboratories, Inc. and 
           the Company, dated January 28, 1986. (Incorporated by reference to 
           Exhibit 10.2B to the Company's Annual Report on Form 10-K for fiscal
           year ended January 2, 1993 (File no. 0-15627).)

  10.2C    Amendment dated November 13, 1992 to Master Software License 
           Agreement and Sublicensing Agreement with Unix System Laboratories, 
           Inc.  (Incorporated by reference to Exhibit 10.2C to the Company's 
           Annual Report on Form 10-K for fiscal year ended January 3, 1998 
           (File no. 0-15627).)

  10.2D    License Agreement, dated July 15, 1983 between The Regents of 
           University of California and the Company, as amended July 2, 1986. 
           (Incorporated by reference to Exhibit 10.2C to the Company's Annual
           Report on Form 10-K for fiscal year ended January 2, 1993 
           (File no. 0-15627).)

 +10.3     Distributorship Agreement between the Company and Oracle 
           Corporation, dated March 31, 1987, as amended on December 29, 1988,
           August 30, 1989, May 28, 1990, May 31, 1991 and June 30, 1991.  
           (Incorporated by reference to Exhibit 10.3 to Amendment No. 1 to 
           the Company's Annual Report on Form 10-K for fiscal year ended 
           January 2, 1993 (File no. 0-15627).)

 *10.4     Aircraft Lease Agreement between the Company and CP Transportation,
           Inc., dated October 1, 1996.  (Incorporated by reference to Exhibit
           10.4A to the Company's Annual Report on Form 10-K for fiscal year 
           ended December 28, 1996 (File no. 0-15627).)

 *10.5     Sequent Computer Systems, Inc. Incentive Stock Option Plan and 
           Nonstatutory Stock Option Plan, adopted March 20, 1984, as amended.
           (Incorporated by reference to Exhibit 10.10 to the Company's 
           Registration Statement on Form S-1 (File no. 33-33444).)


  Exhibit
   Number                           Description

 *10.6     Sequent Computer Systems, Inc. 1987 Employee Stock Option Plan, as
           amended. (Incorporated by reference to Exhibit 10.11 to the Company's
           Registration Statement on Form S-1 (File no. 33-33444).)

 *10.7     Sequent Computer Systems, Inc. 1987 Nonstatutory Stock Option Plan,
           as amended. (Incorporated by reference to Exhibit 10.12 to the 
           Company's Registration Statement on Form S-1 (File no. 33-33444).)

 *10.8     Sequent Computer Systems, Inc. 1989 Stock Incentive Plan, as 
           amended.  (Incorporated by reference to Appendix A to the Company's
           Proxy Statement for its 1994 Annual Meeting of Shareholders).

 *10.9     Sequent Computer Systems, Inc. 1995 Stock Incentive Plan, as 
           amended.  (Incorporated by reference to Appendix A to the Company's
           Proxy Statement dated March 23, 1995).

 *10.10    Sequent Computer Systems, Inc. 1997 Stock Option Plan, as amended.
           (Incorporated by reference to Appendix A to the Company's Proxy 
           Statement dated March 27, 1997).

 *10.12    DP Applications, Inc. Restricted Stock Purchase Agreement, dated 
           December 2, 1996.  (Incorporated by reference to Exhibit 10.12 to 
           the Company's Annual Report on Form 10-K for fiscal year ended 
           December 28, 1996 (File no. 0-15627).)

 *10.13    DP Applications, Inc. and the Robert W. Wilmot and Mary J. Wilmot,
           trustees of the Wilmot Living Trust, Restricted Stock Purchase 
           Agreement, dated November 17, 1997.  (Incorporated by reference to
           Exhibit 10.13 to the Company's Annual Report on Form 10-K for 
           fiscal year ended January 3, 1998 (File no. 0-15627).)

  11       Statement regarding computation of earnings per share.

  13       1998 Annual Report to Shareholders (portions not incorporated 
           by reference are not deemed filed).

  21       Subsidiaries.

  23       Consent of Independent Public Accountants.

  24       Powers of Attorney.

  27       Financial Data Schedule.
           ________________________

   +       Confidential treatment for portions of this contract has been 
           previously requested of the Commission.

   *       Management contract or compensatory plan or arrangement required 
           to be filed as an exhibit pursuant to Item 14(a)(3) of this Report.

      (b)  Reports on Form 8-K.

           No reports on Form 8-K were filed by the Company during the last 
           quarter of fiscal 1998.


                               SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) 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.

                                   Sequent Computer Systems, Inc.

Date:  March 15, 1999              /s/ Robert S. Gregg                    
                                   Robert S. Gregg
                                   Sr. Vice President of Finance
                                   and Chief Financial Officer

   Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on behalf of 
the registrant and in the capacities indicated on March 15, 1999.

         Signature                                   Title


    /s/ Karl C. Powell, Jr.          Chairman and Chief Executive Officer
    (Karl C. Powell, Jr.)            and Director (Principal Executive Officer)


    /s/ John McAdam                  President and Chief Operating Officer
    (John McAdam)                    and Director     
          

    /s/ Robert S. Gregg              Sr. Vice President of Finance and Legal
    (Robert S. Gregg)                and Chief Financial Officer
                                     (Principal Accounting and Financial 
                                     Officer)


    FRANK C. GILL             *     
    (Frank C. Gill)                  Director


    LARRY R. LEVITAN          *     
    (Larry R. Levitan)               Director


    MICHAEL S. SCOTT MORTON   *     
    (Michael S. Scott Morton)        Director


    MARTY STEIN               *     
    (Marty Stein)                    Director


    ROBERT W. WILMOT          *     
    (Robert W. Wilmot)               Director


    By: /s/ Robert S. Gregg   *
    Robert S. Gregg, Attorney-in-fact


                                                             SCHEDULE II
<TABLE>


           SEQUENT COMPUTER SYSTEMS, INC.  AND SUBSIDIARIES 
                  VALUATION AND QUALIFYING ACCOUNTS
                          (In thousands) 

<CAPTION>

                                        Additions     Additions
                          Balance at    Charged to    Charged to    Write-offs   Balance at
                         Beginning of   Costs and    Other Accts.     Net of       End of   
                            Period       Expenses    Describe (1)   Recoveries     Period         

<S>                      <C>            <C>          <C>            <C>          <C>

Year ended Dec. 28, 1996
  Allowance for doubtful
    accounts               $  2,816     $    317      $ (315)        $     12     $  2,806
  Accumulated amortization
    capitalized software   $ 58,308     $ 19,984      $    0         $ 39,846     $ 38,446

Year ended Jan. 3, 1998
  Allowance for doubtful
    accounts               $  2,806     $  2,694      $   (8)        $  2,371     $  3,121
  Accumulated amortization
    capitalized software   $ 38,446     $ 27,570      $    0         $      0     $ 66,016

Year ended Jan. 2, 1999
  Allowance for doubtful
    accounts               $  3,121     $  3,161      $ (134)        $  2,279     $  3,869
  Accumulated amortization
    capitalized software   $ 66,016     $ 31,365      $    0         $ 30,584     $ 66,797

</TABLE>

(1) Foreign currency translation adjustment




                    REPORT OF INDEPENDENT ACCOUNTANTS
                    ON FINANCIAL STATEMENT SCHEDULES



To the Board of Directors of
Sequent Computer Systems, Inc.



Our audits of the consolidated financial statements referred to in our 
report dated January 28, 1999 appearing in the 1998 Annual Report to 
Shareholders of Sequent Computer Systems, Inc. (which report and 
consolidated financial statements are incorporated by reference in this 
Annual Report on Form 10-K) also included an audit of the Financial 
Statement Schedule listed in Item 14(a)(2) of this Form 10-K.  In our 
opinion, this Financial Statement Schedule presents fairly, in all 
material respects, the information set forth therein when read in 
conjunction with the related consolidated financial statements.



PRICEWATERHOUSECOOPERS LLP

Portland, Oregon
January 28, 1999



                                                                 EXHIBIT 11
<TABLE>

             SEQUENT COMPUTER SYSTEMS, INC.  AND SUBSIDIARIES 
                      STATEMENT SHOWING CALCULATION 
                        OF THE BASIC AND DILUTED
                           EARNINGS PER SHARE
                 (In thousands, except per share amounts) 

<CAPTION>



                                         Income (Loss)                    Shares                       Per-Share
                                          (Numerator)                  (Denominator)                     Amount

                                 Fiscal      Fiscal     Fiscal    Fiscal   Fiscal   Fiscal     Fiscal    Fiscal   Fiscal
                                  1998        1997       1996      1998     1997     1996       1998      1997     1996

<S>                              <C>         <C>        <C>       <C>      <C>      <C>        <C>       <C>      <C>

Basic EPS
  Income (loss) available to 
    common shareholders        $ (52,519)   $ 38,687   $ 7,771    43,561   37,899   33,641    $ (1.21)   $ 1.02   $ 0.23


Effect of Dilutive Securities

Stock options                                                               2,653      723
Employee stock purchase plan                                                  156       55
Debentures, if dilutive                          116                          144                                        


Diluted EPS
  Income (loss) available to 
    common shareholders + 
    assumed conversions        $ (52,519)   $ 38,803   $ 7,771    43,561   40,852   34,419    $ (1.21)   $ 0.95   $ 0.23
     

</TABLE>


                                                                  EXHIBIT 13
<TABLE>


              SEQUENT COMPUTER SYSTEMS, INC.  AND SUBSIDIARIES 
                         SELECTED FINANCIAL DATA 
                  (In thousands, except per share amounts) 

<CAPTION>

                                                            Fiscal Year Ended          
                                          Jan. 2,     Jan. 3,    Dec. 28,    Dec. 30,    Dec. 31,
                                           1999        1998        1996        1995        1994
<S>                                       <C>         <C>        <C>         <C>         <C>

OPERATIONS DATA

Total revenue                           $ 784,156   $ 833,886   $ 595,362   $ 540,345   $ 450,823
Income (loss) before income taxes       $ (76,071)  $  50,512   $  10,676   $  47,327   $  38,800
Net income (loss)                       $ (52,519)  $  38,687   $   7,771   $  35,073   $  33,134
Net income (loss) per share - basic     $   (1.21)  $    1.02   $     .23   $    1.09   $    1.08
Net income (loss) per share - diluted   $   (1.21)  $     .95   $     .23   $    1.04   $    1.03

BALANCE SHEET DATA

Working capital                         $ 324,674   $ 404,066   $ 191,810   $ 214,749   $ 168,468
Total assets                            $ 796,115   $ 886,677   $ 603,627   $ 503,923   $ 435,977
Long-term obligations                   $   7,480   $   9,910   $  16,503   $   9,106   $  10,341
Shareholders' equity                    $ 552,854   $ 600,784   $ 374,809   $ 353,188   $ 291,195

</TABLE>



             SEQUENT COMPUTER SYSTEMS, INC. AND SUBSIDIARIES
      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND 
                        RESULTS OF OPERATIONS 



RESULTS OF OPERATIONS                                           

   The Company reported a net loss of $52.5 million in 1998 on a total revenue 
volume of $784.2 million.  The Company's results in 1998 were significantly 
impacted by a pretax net restructuring charge of $61.4 million ($62.9 million 
was recorded in the second quarter of 1998 and was reduced by third and fourth 
quarter estimate revisions of $1.5 million).   Since the restructure, the 
Company has focused on revamping its business strategy and broadening its 
product line while continuing its cost reduction efforts.


Revenue:                                           

(dollars in millions)
                                       Fiscal Year Ended
                        January 2,   %      January 3,    %     December 28,
                           1999    change      1998     change      1996     

  Total Revenue          $ 784.2    (6%)     $ 833.9     40%      $ 595.4

    Product              $ 509.9   (15%)     $ 600.5     45%      $ 414.5
    Professional Service    97.4    29%         75.7     34%         56.5
    Customer Service       176.9    12%        157.7     27%        124.4

    US                   $ 372.6   (17%)     $ 449.4     66%      $ 270.6
    United Kingdom         300.9    12%        268.8     31%        205.5
    Other International    110.7    (4%)       115.7     (3%)       119.3

  Net Income (Loss)      $ (52.5)            $  38.7              $   7.8


Product:

   Product revenue was significantly impacted by a substantial decrease in 
product sales to the Company's largest domestic customer during the third 
quarter of 1998.  Also adversely impacting the Company's product revenue in 
1998 was the transition from its Pentium Pro-based NUMA-Q products to its new 
Pentium II Xeon-based NUMA-Q product line.  The Company did not begin shipment 
of its new product line until late in the third quarter of 1998.    

   In contrast, revenues in 1997 were up 40% over 1996.  The decrease in total 
revenue from 1997 to 1998 was due to a substantial decline in product revenue of
approximately 15%.  Contributing to the substantial increase in 1997 revenues 
was a significant increase in product revenue generated from sales of the 
Company's NUMA-Q 2000 systems which were new to the marketplace in 1997 and 
which represented approximately 68% of the Company's system sales for that year.


Service:

   The Company's service organizations continue to represent an increased 
percentage of total revenue, approximately 35% in 1998 compared to 28% and 30% 
in 1997 and 1996, respectively.  Revenue increases from professional services 
were approximately 29% and 34% in 1998 and 1997, respectively.  Customer service
revenue increased approximately 12% and 27% in 1998 and 1997, respectively.  
Continued growth in the number and size of new projects, with both new and 
existing customers, contributed to the overall increases in revenue within the 
Company's professional service organization. Customer service revenue continues 
to increase from growth in the number of systems under maintenance contracts.  

   Foreign revenue has continued to increase, primarily from increased volume 
in the Company's European operations, specifically in the United Kingdom.  


The following table sets forth certain operating data as a percentage of 
total revenue:

<TABLE>

<CAPTION>


                                                     Fiscal Year Ended     
                                            January 2,   January 3,   December 28,
                                               1999         1998         1996

<S>                                         <C>          <C>          <C>

Revenue:                                
  Product                                       65%          72%           70%
  Service                                       35           28            30
    Total revenue                              100          100           100
Cost of product and service                     65           58            57
Gross profit                                    35           42            43
Operating expenses:
  Research and development                       9            8             9
  Selling, general and administrative           28           28            32
  Restructuring charges                          8            -             -
    Total operating expenses                    45           36            41
Operating income (loss)                        (10)           6             2
Interest income (expense), net                   1            -             -
Other expense, net                              (1)           -             -
Income (loss) before provision for
  (benefit from) income taxes                  (10)           6             2
Provision for (benefit from) income taxes       (3)           1             1
Net income (loss)                               (7)%          5%            1%


</TABLE>

     
GROSS MARGINS
                                Fiscal Year Ended     
                      January 2,    January 3,    December 28,
                        1999          1998           1996

     Product             39%           49%            52%
     Service             28%           26%            23%


   The factors influencing gross margins in a given period generally include 
overall pricing trends in our products' markets, unit volumes (which affect 
economies of scale), product configuration mix, the impact of existing product 
lifecycles, changes in component and manufacturing costs and the mix between 
product and service revenue.  

Product:

   During 1998, product margins continued to be negatively impacted by 
competitive pricing pressures and the impact of the product transition during 
the latter part of 1998.  The Company's Pentium Pro-based product line was 
nearing the end of its product life cycle, which resulted in heavier discounting
of the products sold during 1998.  The Company's new Pentium II Xeon-based 
NUMA-Q products were announced to the marketplace near the end of the third 
quarter; however, formal introduction and shipment of the products did not begin
until the fourth quarter of 1998.  Product margins were also impacted by certain
non-recurring charges for inventory obsolescence provisions made during the 
second quarter of 1998.  Additionally, an increased product mix of third-party 
products, which generally yield lower margins than the Company's products, 
contributed to the overall decline in product margins in both 1998 and 1997. 

Service:

     Partially offsetting decreases in product margins were slight increases in 
service margins which were primarily realized from the Company's professional 
service organization.  Sequent has enhanced its focus on the business strategy 
within this segment of the Company which has resulted in significant 
improvementsin the profitability of this organization, particularly in 1998. 


RESEARCH AND DEVELOPMENT

<TABLE>

<CAPTION>

                                                  Fiscal Year Ended     
(dollars in millions)              January 2,   %     January 3,   %    December 28,
                                      1999    change     1998    change     1996

<S>                                <C>        <C>     <C>        <C>    <C>

Research and development expense     $74.8      14%     $65.4      22%     $53.7
As a percentage of total revenue       10%                 8%                 9%

Software costs capitalized           $40.2      17%     $34.2      --      $34.2

</TABLE>


   Research and development expense continued to increase in amount.  
During 1998 and 1997, the Company made substantial investments in the 
development of its new NUMA-Q product lines.  Specifically, significant 
investments were made in the hardware and software development of its new 
Pentium II Xeon-based NUMA-Q product and in the technology of the 
Company's first generation NUMACenter which allows running Unix and 
Windows NT applications on a single system.  Both of these new products 
were formally introduced into the marketplace during the latter part of 
1998.  


SELLING, GENERAL AND ADMINISTRATIVE

<TABLE>

<CAPTION>

(dollars in millions)                                   Fiscal Year Ended     
                                      January 2,     %     January 3,     %    December 28,
                                         1999     change      1998     change      1996

<S>                                   <C>         <C>      <C>         <C>     <C>

Selling, general and administrative     $215.3     (8%)      $234.0      22%      $191.1
As a percentage of total revenue           27%                  28%                  32%

</TABLE>


   Selling, general and administrative expenses decreased both in amount 
and as a percentage of revenue in 1998 over 1997.  Savings were realized 
primarily from the effects of aggressive cost reduction measures 
implemented during 1998 and as a result of the Company's restructure which 
took place in the second quarter of 1998.  The overall decrease in 
selling, general and administrative expenses resulted primarily from 
reductions in payroll, employee training and travel expenses.  While these 
dollar decreases approximated 8%, the impact of these expenses as a 
percentage of revenue was tempered due to the decline in total revenue in 
1998 over 1997.  The increase in selling, general and administrative 
expenses in 1997 over 1996 was primarily due to the increased activity 
associated with the overall sales volume generated that year.  


RESTRUCTURING CHARGES

   During the second quarter of 1998, the Company recorded restructuring 
charges of $62.9 million in connection with management's decision to 
accelerate changes in its business model to leverage the strength of its 
technology roadmap and market position.  The restructuring charge was 
reduced during the third and fourth quarters by estimate revisions 
totalling $1.5 million.  The majority of these revisions were adjustments 
to prepaid software licenses and facilities.  As part of the restructuring 
process, which was substantially completed during the second quarter of 
1998, the Company reorganized its operations to revise the focus of its 
business strategy and broaden its line of Intel-based servers.  As part of 
the restructuring efforts, the Company expanded its product offerings, 
including its new Xeon-based NUMA product and also NUMACenter, both of 
which were formally introduced into the marketplace in the latter part of 
1998.  The restructuring charges of $62.9 million included employee 
termination and other related costs ($7.2 million); facilities and office 
space costs ($13.7 million); write-offs of non-strategic assets, 
principally prepaid software licenses ($27.2 million), capital assets 
($7.9 million), capitalized software ($2.5 million), goodwill ($2.5 
million), and other assets, principally prepaid expenses ($1.9 million).

   The employee termination costs resulted from the elimination of 265 
positions worldwide.  The employee groups impacted by the eliminations 
encompassed all functions within the Company.  All termination costs 
pertaining to the eliminated positions are included as restructuring costs 
in the accompanying Statements of Operations.  Approximately 74% of the 
employee termination costs accrued during the second quarter of 1998 were 
paid as of January 2, 1999.  Approximately 24% of the accrued costs were 
written off by the Company during 1998 and the remainder will be paid in 
1999.

   Facilities costs represent expenses associated with excess office 
space and related fixed costs for the Company's headquarter and field 
office locations.  The amount written off was determined using an analysis 
of individual specific lease terms, estimated sub-lease income to be 
realized and office headcount for unutilized facilities.

   The majority of capital asset write-offs represent retirements of 
hardware and software no longer being used for customer demonstrations and 
showcases due to the strategic product shift associated with the 
restructure.  The method of determining fair value of costs written off 
was the net book value recorded at the time of the restructuring.

   Remaining cash outlays expected from the restructuring consist of $16 
million relating to ongoing facilities costs and $500,000 relating to 
employee termination and prepaid software licenses.  It is anticipated 
that the restructuring actions taken in the second quarter will yield 
operating cost reductions of approximately $25 million during 1999.

<TABLE>

   The following table presents a summary of the restructuring charges recorded during 1998 and the resulting net balance sheet
amounts recorded as of January 2, 1999.  The balance of accrued restructuring costs of $16.5 million at January 2, 1999 is 
included in Accounts Payable and Other in the accompanying balance sheet.

<CAPTION>

(dollars in millions)
                                          Second                                    Third
                         Restructuring    Quarter     Write-offs/   Balance at     Quarter     Write-offs/    Balance at
                             Costs      Expenditures  Adjustments  July 4, 1998  Expenditures  Adjustments  October 3, 1998

<S>                      <C>            <C>           <C>          <C>           <C>           <C>          <C> 

Employee termination and
  related costs             $  7.2        $ (2.5)      $  (0.3)       $  4.4       $ (2.5)      $ (0.2)         $  1.7
Prepaid software licenses     27.2             -         (24.9)          2.3            -         (0.6)            1.7
Facilities                    13.7          (0.1)            -          13.6         (0.7)         0.1            13.0
Capital assets                 7.9             -          (7.9)            -            -          0.1             0.1
Capitalized software           2.5             -          (2.5)            -            -            -               -
Goodwill                       2.5             -          (2.5)            -            -            -               -
Other assets                   1.9             -          (1.9)            -            -            -               -
                            $ 62.9        $ (2.6)      $ (40.0)       $ 20.3       $ (3.2)      $ (0.6)         $ 16.5

</TABLE>

<TABLE>

<CAPTION>
                                          Fourth
                                          Quarter     Write-offs/    Balance at
                                        Expenditures  Adjustments  January 2, 1999

<S>                                     <C>           <C>          <C>

Employee termination and
  related costs                           $ (0.3)      $ (1.2)        $  0.2
Prepaid software licenses                      -         (1.4)           0.3
Facilities                                  (0.7)         3.7           16.0
Capital assets                                 -         (0.1)             -
Capitalized software                           -            -              -
Goodwill                                    (0.1)         0.1              -
Other assets                                   -            -              -
                                          $ (1.1)      $  1.1         $ 16.5

</TABLE>


INTEREST AND OTHER, NET

(dollars in millions)
                                     Fiscal Year Ended     
                      January 2,   %      January 3,   %     December 28,
                        1999     change     1998     change     1996

Interest income         $ 9.2      80%      $ 5.1      70%      $ 3.0
Interest expense        $ 4.1     (33%)     $ 6.1      91%      $ 3.2
Other expense, net      $ 3.4      48%      $ 2.3      15%      $ 2.0

   Interest income is primarily generated from invested cash and cash 
equivalents and restricted deposits held at foreign and domestic banks.  
The significant increase in interest income in 1998 and 1997 is the result 
of investment of cash received from the Company's stock offering in August 
of 1997 and, in 1998, from investment of cash proceeds generated from 
improved collection of accounts receivable during the year.  Interest 
expense includes costs related to foreign currency hedging loans, interim 
short-term borrowings and capital lease obligations and, in 1997 and 1996, 
convertible debentures.  The decrease in interest expense in 1998 over 
1997 is attributed to the decline in the use of the Company's line of 
credit and hedge loans during 1998.  In 1997, the Company increased the 
use of its domestic line of credit for investments in its NUMA-Q and next-
generation product lines, which resulted in an increase in interest 
expense.  Other expense consists of discounts on the sale of accounts 
receivable and net realized and unrealized foreign exchange gains and 
losses.  The increases in 1998 and 1997 are primarily from fluctuations in 
foreign exchange rates and from increased activity in factoring the 
Company's accounts receivable, specifically in 1998.


INCOME TAXES

   The Company recorded a $23.6 million benefit from income taxes in 
1998 on a net loss before tax of $76.1 million.  The difference between 
the statutory rate and the effective tax rate is principally due to a 
valuation allowance established for the potential expiration of certain 
tax attributes carried forward from prior years, offset by the benefit 
from the research tax credit and the Company's Foreign Sales Corporation.  
The 1998 effective tax rate benefit of 31.0% compares to an effective tax 
rate of 23.4% in 1997 and 27.2% in 1996.


LIQUIDITY AND CAPITAL RESOURCES

   Working capital was $324.7 million at January 2, 1999 compared to 
$404.1 million at January 3, 1998.  The Company's current ratio at January 
2, 1999 and January 3, 1998 was 2.4:1 and 2.5:1, respectively.

   Cash and cash equivalents increased $59.6 million during 1998.  The 
Company's cash and cash equivalents were primarily impacted by the $107 
million net decrease in accounts receivable.  During 1998, the Company 
focused resources on collection efforts and credit terms, substantially 
decreasing the number and size of outstanding accounts.  Offsetting the 
impact of the net decrease in accounts receivable were investing 
activities of $58.6 million and financing activities of $40.1 million.

   The Company has a $40 million receivable sales facility with a group 
of banks.  At January 2, 1999, accounts receivable in the accompanying 
consolidated balance sheet is net of $24 million received by the Company 
under this agreement to sell its domestic accounts receivable.  
Additionally, the Company entered into two transactions to factor certain 
foreign receivables, without recourse, at an average rate of 6.6%.  As of 
January 2, 1999, $10 million relating to these transactions was netted 
against accounts receivable in the accompanying consolidated balance 
sheet.

   The Company maintains an $80 million revolving line of credit 
agreement.  The line is unsecured and extends through April 1, 2001.  The 
line contains certain financial covenants and prohibits the Company from 
paying dividends without the lenders' consent.  At January 2, 1999, there 
was no outstanding balance under the line of credit.

   The Company maintains a short-term borrowing agreement with a foreign 
bank to cover foreign currency exposures.  Maximum borrowings allowed 
under the foreign bank agreement were $85.1 million, of which $28.3 
million was outstanding at January 2, 1999 (based on currency exchange 
rates on such date).

   The Company also maintains a miscellaneous borrowing arrangement with 
a foreign bank.  At January 2, 1999, $1.6 million was outstanding under 
this agreement.

   Management expects that its current available cash balances and funds 
generated from operations will provide adequate resources to meet the 
Company's anticipated operational cash requirements for at least the next 
twelve months.


IMPACT OF THE YEAR 2000 ISSUE

   The Year 2000 Issue is the result of computer programs being written 
using two digits rather than four to define the applicable year.  Any of 
the Company's software programs and microcircuitry that have date-
sensitive features may recognize a date using "00" as the year 1900 
rather than the year 2000.  This could result in a system failure or 
miscalculations causing disruptions of operations.  The Year 2000 Issue 
affects the Company's internal systems as well as any of the Company's 
products that include date-sensitive software.

   Sequent is executing a company-wide Year 2000 Readiness Program 
(Program) for the Company's products, on-going operations (operations), 
mission-critical information systems (IS), and key suppliers (suppliers).  
The Program's goal was to identify and conduct remediation of critical 
century date change issues by the end of 1998.  Ongoing remediation, 
testing, and contingency planning are expected to continue throughout 
1999.  The Year 2000 Readiness Program is organized into six major phases: 
1) exposure inventory, 2) risk assessment, 3) prioritization, 4) 
remediation (either by repair or replacement), 5) contingency planning, 
and 6) testing/verification.  These stages have been largely completed for 
the Company's standard products and are in progress for ongoing 
operational issues as well as critical suppliers.  The Program 
organization consists of a Steering Committee made up of Company 
executives, a Year 2000 taskforce representing each of the Company's major 
departments, and a Year 2000 Project Management Office.  In addition, 
several Focus Teams have been set up to deal with cross-functional issues 
related to customers, partners, and suppliers.  Operational program work 
is being done by each of the Company's departments with oversight by the 
Year 2000 Program Office.  Operational program work includes the Company's 
critical business computer applications, data, and infrastructure.  
Mission-critical third party service and equipment suppliers are being 
contacted via written inquiry, as well as direct discussion, to understand 
and mitigate potential risks. 

   The current status of the Company's Year 2000 Readiness Program is as 
follows:

   The Company's current line of hardware products, which are designed 
and manufactured to the Company's specifications, are Year 2000 ready if 
utilized with the appropriate version of the operating system software.  
The Company cannot ensure that its software products do not contain 
undetected problems associated with Year 2000 compliance.  Such problems, 
should they occur, may result in material adverse effects on future 
operating results.  Of the Company's eight Operations remediation 
programs, five have completed the remediation phase and three are still in 
process.  Among the latter, remediation status ranges from 40% to 90% 
complete.  Identified business critical exposures are expected to be 
resolved by the second quarter of 1999.  The Company's Supplier readiness 
program is managed through its Strategic Sourcing group.  Of those 
suppliers identified as business critical, all have remediation plans in 
place and completion is planned on or before end of the second quarter of 
1999.  The Company's Information Systems group is remediating both 
critical IS applications and IT infrastructure.  Of the identified 
enterprise level business critical applications, over 90% have now been 
remediated.  All IS-managed applications, regardless of business 
criticality, will be remediated, replaced or retired, worldwide.  
Remediation of the Company's worldwide IT infrastructure (networks, 
servers & PCs) is 90% complete.  Any other IT exposures, such as workgroup 
level software applications, are being identified and dealt with as part 
of individual department Y2K programs. 

   The total cost of the Program is currently estimated to be 
approximately $10 million and is being funded through operating cash 
flows.  The Company is expensing costs associated with identification and 
resulting changes to these systems, but does not expect the amounts to 
have a material effect on its financial position or results of operations.  
These costs are not incremental as the Company's internal IS development 
resources were re-directed solely to the Year 2000 remediation effort in 
1998.  As of January 2, 1999, the total amount expended on the Program was 
approximately $6 million, with the majority of the costs representing 
hardware and labor expenditures.  
 
   The Company has classified potential worst case scenarios as either 
1) Year 2000 related failures in internal business critical information 
system applications or 2) the development of service or product supply 
difficulties by business critical suppliers.  These circumstances are not 
considered probable, but have been reviewed as part of the Company's due 
diligence efforts.  For Year 2000 type failures in internal applications 
(scenario 1), business critical applications have been identified, 
assessed as to possible business impact of their failure and are being 
repaired, upgraded or replaced based on the severity of potential impact.  
For each of these applications, a business continuity contingency plan is 
expected to be in place by the end of the first half of 1999.  For service 
and product supplier type failures, an inventory has been completed and 
the business critical suppliers have been identified.  A variety of risk 
reduction strategies have commenced, including but not limited to, 
developing possible alternative suppliers, acquiring safety stock and 
establishing enhanced testing programs and process audits.  For the 
identified business critical suppliers, the Company expects to establish a 
contingency plan by mid 1999.

   There can be no assurance, however, that the systems or products of 
other companies on which the Company's systems also rely will be converted 
timely or that any such failure to convert by a vendor, customer or 
another company would not have an adverse effect on the Company's systems 
or results of operations.


EURO CONVERSION

   The European Economic and Monetary Union (EMU) and a new currency, 
the "Euro", went into effect in Europe on January 1, 1999.  This is a 
significant and critical element in the European Union's (EU) plan to 
blend the economies of the EU's member states into one integrated market, 
with unrestricted and unencumbered trade and commerce across borders.  
Eleven European countries (the "participating countries") of the fifteen 
member EU countries will initially participate (Austria, Belgium, Finland, 
France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and 
Spain).  Other member states (Denmark, Greece, the United Kingdom and 
Sweden) may join in the years to come.  The Euro will trade on currency 
exchanges and the legacy currencies will remain legal tender for a 
transition period between January 1, 1999 and January 1, 2002.  During the 
transition period, public and private companies may pay for goods and 
services using either the Euro or the participating country's legacy 
currency.

   The Company is currently determining the necessary modifications to 
its internal systems to accommodate Euro-denominated transactions and is 
assessing the business implications of the conversion to the Euro, 
including long-term competitive implications and the effect of market risk 
with respect to financial instruments.  The Company does not believe the 
financial impact of these matters, if any, will be material to its results 
of operations, financial condition or cash flows.  However, the Company 
will continue to assess the impact of Euro conversion issues as the 
applicable accounting, tax, legal and regulatory guidance evolves. 


DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS

Risk Management Strategy

   In the normal course of business, Sequent enters into various 
financial instruments, including derivative financial instruments, for 
purposes other than trading.  Derivative financial instruments are not 
entered into for speculative purposes.  These instruments primarily 
consist of accounts receivable, short term investments, short-term debt, 
forward exchange contracts and option contracts which are used to reduce 
Sequent's exposure to currency exchange rates.  At inception, foreign 
exchange contracts are designated as hedges of firmly committed or 
forecasted transactions.  These transactions are generally expected to be 
completed in less than one year.  The forward contracts and options 
generally mature within twelve months.  The majority of Sequent's foreign 
exchange forward contracts are to exchange Japanese Yen, Australian 
Dollars and New Zealand Dollars.  The option contracts are no-cost collars 
and exchange British Pounds.

   Exposure to credit risk is managed through credit approvals and 
monitoring procedures, and management believes that the reserves for 
losses are adequate.

   The counterparties to these financial instruments are substantial and 
creditworthy corporations, state agencies and multinational commercial 
banks.  In management's opinion the risk of counterparty nonperformance 
associated with these instruments is not considered to be significant.

Interest Rate Risk

   The Company routinely invests in short-term financial instruments 
within the parameters of its investment policy with maturities of less 
than three months.  The instruments pay a fixed rate of return.  These 
instruments are subject to overall market interest rate sensitivity upon 
maturity.

   As part of the Company's foreign currency hedging activities, the 
Company maintains short-term loans with a multinational commercial bank.  
These loans are for durations ranging from fifteen days to three months 
and carry a fixed interest rate.  Upon maturity, these instruments are 
subject to overall market interest rate sensitivity. 

   The Company also maintains two long-term leases with variable 
interest rates based on LIBOR (London Inter Bank Offer Rate).  The table 
below illustrates the effect on lease payments of a +/-10% change in the 
underlying base rate:

                          1999 Forecast Rental Payments

     Base Rate                       $1,957K
     Base Rate plus 10%              $2,072K
     Base Rate less 10%              $1,748K


Foreign Exchange Risk

   The table below presents foreign exchange contracts, options and debt 
at January 2, 1999 and January 3, 1998 (in thousands).  The notional 
amounts represent agreed upon amounts on which calculations of dollars to 
be exchanged are based, and are an indication of the extent of Sequent's 
involvement in such instruments.  They do not represent amounts exchanged 
by the parties and, therefore, are not a measure of the instruments.

                             Contract   Carrying Amount          Fair Value
(in thousands)                Amount    Asset  Liability     Asset   Liability

   1998
     
   FX Forward Contracts     $   8,086    $ -    $     -    $  8,086   $ 8,086
   FX Options (net)           129,100      -          -         135       123
   Debt                        28,244      -     28,244           -    28,244


   1997

   FX Forward Contracts     $  14,636    $ -    $     -    $ 14,781   $14,781
   Debt                        68,791      -     68,791           -    68,791


   Fair values of financial instruments represent estimates of possible 
value that may not be realized in the future.


EUROPEAN SALES OPERATIONS

   In January 1999, the Company announced that it signed a strategic 
partnership agreement with Comparex, one of Europe's leading suppliers of 
complete solutions for IT infrastructures.  The partnership allows 
Comparex to take responsibility for Sequent's sales activities in Austria, 
Belgium, Germany, the Netherlands, Portugal, Spain and Switzerland.  The 
Company's operations in the United Kingdom and France geographies, which 
represent the majority of the Company's European business, are not 
included in the partnership agreement.  The majority of the Company's 
personnel in the countries included under the agreement will become 
employees of Comparex and the remainder will stay with Sequent to manage 
and support the relationship with Comparex, continuing to provide 
specialist skills and expertise.  The agreement also provides for the sale 
of certain assets to Comparex at recorded book value.  Management 
anticipates that the new relationship with Comparex will positively impact 
both revenues and operating income in 1999 and 2000 in these geographies. 


FORWARD-LOOKING STATEMENTS

   The Chairman's Letter, Management's Discussion and Analysis of 
Financial Conditions and Results of Operations and "Products," 
"Services," and "Solutions" contain information regarding the Company's 
expectations or goals as to: the market for the Company's products; 
development and release of new products; anticipated benefits from the new 
arrangements with IBM and Comparex; estimated costs to achieve Year 2000 
compliance; growth, profitability and backlog improvements and increase in 
shareholder value; and expense reductions.  These statements are forward-
looking statements that involve a number of risks and uncertainties, and 
actual results may differ materially from the forward-looking statements.  
Factors that could adversely affect the market for the Company's products 
include, but are not limited to, business conditions and growth in the 
electronics industry and general economies, both domestic and 
international, and lower than expected capital expenditure levels by 
customers.  Factors that could cause new product development to be delayed 
or not successful include, but are not limited to, technological 
difficulties encountered in product development and resource constraints.  
Factors that could adversely affect the anticipated benefits from the IBM 
relationship include, but are not limited to, the failure to develop and 
sell in significant quantities the products to be covered by the 
relationship.  Anticipated benefits from the arrangement with Comparex 
could be adversely affected if Comparex does not sell Sequent products at 
the expected levels.  Factors that could adversely affect the estimated 
costs to achieve Year 2000 compliance are set forth above under "Impact 
of the Year 2000 Issue."  Factors that could adversely affect the 
Company's growth, profitability, shareholder value, backlog and expense 
levels include, but are not limited to, the failure to timely complete 
product development and release new products; lower than expected customer 
acceptance of NUMA-Q 1000, NUMA-Q 2000 and NUMACenter and future products; 
significant fluctuations in quarterly operating results; lower than 
expected customer orders; delays in receipt of orders or cancellation of 
orders; competitive factors, including increased competition, new product 
offerings by competitors and price pressures; the discontinuance of 
relationships with the Company's strategic partners; the unavailability of 
third party parts and supplies at reasonable prices; changes in product 
mix and the mix between product and service revenue; and product shipment 
interruptions due to manufacturing problems.  The Company's forward-
looking statements apply only as of the date made.  The Company undertakes 
no obligation to publicly release the result of any revision to these 
forward-looking statements which may be made to reflect events or 
circumstances after the date made or to reflect the occurrence of 
unanticipated events. 


              SEQUENT COMPUTER SYSTEMS, INC.  AND SUBSIDIARIES 
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                  (In thousands, except per share amounts) 


                                                   Fiscal Year Ended     
                                           Jan. 2,      Jan. 3,     Dec. 28,
                                            1999         1998         1996
          
Revenue:
  Product                                $ 509,830    $ 600,496    $ 414,418
  Service                                  274,326      233,390      180,944
    Total revenue                          784,156      833,886      595,362

Costs and expenses:
  Cost of products sold                    311,705      309,016      197,702
  Cost of service revenue                  198,793      171,595      139,983
  Research and development                  74,808       65,414       53,733
  Selling, general and administrative      215,336      234,037      191,069
  Restructuring charges (Note 11)           61,372            -            -
    Total costs and expenses               862,014      780,062      582,487

Operating income (loss)                    (77,858)      53,824       12,875
Interest income                              9,202        5,096        3,007
Interest expense                            (4,059)      (6,086)      (3,187)
Other expense, net                          (3,356)      (2,322)      (2,019)

Income (loss) before provision for
  (benefit from) income taxes              (76,071)      50,512       10,676
Provision for (benefit from) income taxes  (23,552)      11,825        2,905
     
Net income (loss)                        $ (52,519)   $  38,687    $   7,771

Net income (loss) per share - 
  basic (Note 1)                         $   (1.21)   $    1.02    $    0.23

Net income (loss) per share - 
  diluted (Note 1)                       $   (1.21)   $    0.95    $    0.23

     

                              
The accompanying notes to consolidated financial statements are an 
integral part of these statements.



              SEQUENT COMPUTER SYSTEMS, INC.  AND SUBSIDIARIES 
                        CONSOLIDATED BALANCE SHEETS 
                  (In thousands, except per share amounts) 


                                                   Jan. 2, 1999  Jan. 3, 1998
ASSETS                                                                   
Current assets:                                                          
  Cash and cash equivalents                          $ 192,876    $ 133,299
  Restricted deposits                                   28,280       68,791
  Receivables, net                                     221,611      328,884
  Inventories                                           86,333      112,228
  Prepaid royalties and other                           23,282       28,147
      Total current assets                             552,382      671,349
Property and equipment, net                            133,831      134,728
Capitalized software costs, net                         72,469       66,244
Other assets, net                                       37,433       14,356
      Total assets                                   $ 796,115    $ 886,677

LIABILITIES AND SHAREHOLDERS' EQUITY 
Current liabilities: 
  Notes payable                                      $  29,908    $  69,893
  Accounts payable and other                           124,099      128,157
  Accrued payroll                                       19,070       22,843
  Unearned revenue                                      47,446       40,946
  Income taxes payable                                   4,865        3,134
  Current obligations under capital leases               2,320        2,310
      Total current liabilities                        227,708      267,283
Other accrued expenses                                   8,073        8,700
Long-term obligations under capital leases               7,480        9,910
      Total liabilities                                243,261      285,893
 
Commitments and contingencies (Notes 5, 6, 10 and 12)
                                                                        
Shareholders' equity: 
  Common stock, $.01 par value, 100,000 shares
    authorized, 43,471 and 42,962 shares outstanding       435          430
  Paid-in capital                                      511,169      508,858
  Retained earnings                                     46,883       99,402
  Accumulated other comprehensive income:
    Foreign currency translation adjustment             (5,633)      (7,906)
      Total shareholders' equity                       552,854      600,784
      Total liabilities and shareholders' equity     $ 796,115    $ 886,677
                                                                         
                              
The accompanying notes to consolidated financial statements are an 
integral part of these statements.


             SEQUENT COMPUTER SYSTEMS, INC.  AND SUBSIDIARIES 
             CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 
                            (In thousands) 

<TABLE>

<CAPTION>

                                                                        Foreign
                                                                       currency               Total annual
                                Common Stock     Paid-in    Retained  translation            comprehensive
                               Shares   Amount   capital    earnings  adjustment    Total       income

<S>                            <C>      <C>      <C>        <C>       <C>           <C>      <C>

Balance, December 30, 1995     33,221   $ 332   $ 304,343   $ 52,945   $ (4,432)  $ 353,188  $

Common shares issued              967      10       9,622          -          -       9,632
Tax benefit of option exercises     -       -         175          -          -         175
Warrants issued                     -       -       1,176          -          -       1,176
Net income                          -       -           -      7,771          -       7,771       7,771
Foreign currency translation
  adjustment                        -       -           -          -      2,868       2,868       2,868
Rounding                            -       -           -         (1)         -          (1)
Balances, December 28, 1996    34,188     342     315,316     60,715     (1,564)    374,809    $ 10,639

Common shares issued            8,198      82     181,580          -          -     181,662
Tax benefit of option exercises     -       -       3,021          -          -       3,021
Conversion of debentures          576       6       8,941          -          -       8,947
Net income                          -       -           -     38,687          -      38,687      38,687
Foreign currency translation
  adjustment                        -       -           -          -     (6,342)     (6,342)     (6,342)
Balances, January 3, 1998      42,962     430     508,858     99,402     (7,906)     600,784   $ 32,345

Common shares issued            2,243      22      21,165          -          -      21,187
Common shares repurchased      (1,734)    (17)    (19,466)         -          -     (19,483)
Tax benefit of option exercises     -       -         612          -          -         612
Net loss                            -       -           -    (52,519)         -     (52,519)    (52,519)
Foreign currency translation
  adjustment                        -       -           -          -      2,273       2,273       2,273
Balances, January 2, 1999      43,471    $435   $ 511,169   $ 46,883   $ (5,633)  $ 552,854    $(50,246)

</TABLE>


The accompanying notes to consolidated financial statements are an 
integral part of these statements.




             SEQUENT COMPUTER SYSTEMS, INC. AND SUBSIDIARIES 
                  CONSOLIDATED STATEMENTS OF CASH FLOWS 
                             (In thousands) 

<TABLE>

<CAPTION>                                        
                                                              Fiscal Year Ended
                                                   Jan 2, 1999   Jan. 3, 1998   Dec. 28, 1996

<S>                                                <C>           <C>            <C>

Cash flow from operating activities: 
  Net income (loss)                                 $ (52,519)    $  38,687       $   7,771
  Reconciliation of net income (loss)  
    to net cash and cash equivalents provided
    by operating activities- 
      Depreciation and amortization                    88,374        83,649          65,534
      Restructuring charges not affecting cash         55,950            --              --
      Deferred income taxes                           (25,405)         (535)            800
  Changes in assets and liabilities- 
      Receivables, net                                107,273      (119,132)        (31,430
      Inventories                                      25,895       (37,737)        (13,638)
      Prepaid royalties and other                     (11,755)        2,430         (17,113)
      Accounts payable and other                      (11,280)       40,683          31,282
      Accrued payroll                                  (5,433)       (2,010)         13,130
      Unearned revenue                                  6,500        10,159           9,321
      Income taxes payable                              1,731           117          (1,964)
      Other, net                                      (22,339)        7,418             455
  Net cash provided by      
      operating activities                            156,992        23,729          64,148
                                       
Cash flow from investing activities: 
  Restricted deposits                                  40,511       (24,136)         (5,013)
  Purchases of property and equipment, net            (58,860)      (58,698)        (80,617)
  Capitalized software costs                          (40,217)      (34,247)        (34,170)
  Other assets, net                                        --            --         (15,600)
    Net cash used for investing activities            (58,566)     (117,081)       (135,400)
                      
Cash flow from financing activities: 
  Notes payable, net                                  (39,985)        9,968          18,779
  Proceeds (payments) under capital lease obligations  (2,410)       (2,509)         14,662
  Long-term debt payments                                  --          (133)             --
  Stock issuance proceeds, net                         21,799       184,683          10,983
  Stock repurchases                                   (19,483)           --              --
    Net cash (used) provided by financing activities  (40,079)      192,009          44,424

Effect of exchange rate changes on cash                 1,230        (3,337)          2,868

Net increase (decrease) in cash and cash equivalents   59,577        95,320         (23,960)
Cash and cash equivalents at beginning 
  of period                                           133,299        37,979          61,939
Cash and cash equivalents at end of period          $ 192,876     $ 133,299       $  37,979

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

              SEQUENT COMPUTER SYSTEMS, INC. AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

    Sequent Computer Systems, Inc. and subsidiaries ("Sequent" or the 
"Company") was incorporated in January 1983.  Sequent is a leading 
provider of scalable, Intel-based, UNIX and Windows NT solutions for the 
data center.  Sequent designs, manufactures and markets systems based on 
Cache Coherent Non-Uniform Memory Access (CC-NUMA) architecture and used 
primarily as application and database servers for large commercial 
applications.  These applications include: OLTP, packaged business 
(financial, manufacturing and human resources) solutions, also called ERP; 
and CRM, a broad solution set that includes back office DSS and data 
warehouses supporting front-office marketing, sales and service 
applications.  Sequent provides consulting and professional services to 
help large organizations identify complex information technology (IT) 
problems and develop solutions that combine its products with those of its 
hardware, software and solutions partners.  The Company's customer service 
organization offers an industry-leading portfolio of data center support 
services that, when customized to customers' business and IT requirements, 
create total service solutions for business-critical computing.

    Principles of Consolidation.  The Company's fiscal year is generally 
based on a 52-week year (53 weeks in Fiscal 1997) ending the Saturday 
closest to December 31.  The consolidated financial statements of the 
Company include the accounts of Sequent Computer Systems, Inc. and its 
wholly-owned subsidiaries.  All significant intercompany accounts and 
profits have been eliminated.  

    Cash and Cash Equivalents.  The Company considers short-term 
investments which are highly liquid, readily convertible into cash and 
have original maturities of less than three months to be cash equivalents.

    Revenue Recognition and Receivables.  Revenue from product sales is 
generally recognized upon shipment; however, depending upon contract 
terms, revenue recognition may be deferred until customer acceptance or 
clarification of funding.  Revenue is recognized as earned on the 
straight-line basis over the term of customer service/maintenance 
contracts, and on either the percentage-of-completion or milestone 
achievement basis for professional service contracts.  

    Receivables are shown net of allowance for doubtful accounts of $3.9 
million at January 2, 1999 and $3.1 million at January 3, 1998.  

    The Company has an agreement with a group of banks to sell, without 
recourse, undivided ownership interests in a revolving pool consisting of 
substantially all of the Company's domestic accounts receivable for a 
maximum of $40 million.  The agreement expires April 1, 2001.  At January 
2, 1999 and January 3, 1998, accounts receivable in the accompanying 
consolidated balance sheets is net of $24 million and $20 million, 
respectively, received by the Company under this agreement.  Additionally, 
the Company entered into two transactions to factor certain foreign 
receivables, without recourse, at an average rate of 6.6%.  As of January 
2, 1999, $10 million relating to these transactions was netted against 
accounts receivable in the accompanying consolidated balance sheet.

    The Company had no single customer that represented greater than 10% 
of total revenue in 1998 or 1996. Approximately 19% of the Company's 
revenue in 1997 was from one customer.  International sales represented 
approximately 53% of the Company's total revenue in 1998, 46% in 1997 and 
55% in 1996.

    Inventories.  Inventories are stated at the lower of cost or market.  
Costs are determined using the first-in, first-out (FIFO) method and 
include material, labor and manufacturing overhead.  

    Prepaid Licenses and Royalties.  The Company has entered into 
agreements with various vendors who provide for prepayment for future 
licenses and/or royalties related to sales of certain software.  Prepaid 
amounts are realized upon receipt of reverse royalties from the vendors 
generated from software sales by the Company.  

    Included in prepaid licenses and other assets as of January 3, 1998 
were prepaid licenses acquired from a single vendor totaling $25.3 
million.  As of January 2, 1999, the majority of these licenses have been 
written off as part of the Company's 1998 restructuring.

    Property and Equipment.  Property and equipment are stated at cost 
and depreciated over their estimated useful lives, ranging from three to 
five years, on the straight-line method.  Leasehold improvements and 
equipment held under capital leases are amortized on the straight-line 
basis over the shorter of the asset life or lease term.  Maintenance and 
repairs are expensed as incurred.  

    Research and Development.  Software development costs for certain 
projects are capitalized from the time technological feasibility is 
established to the time the resulting software product is first shipped.  
Capitalized software costs are stated at the lower of cost or net 
realizable value and are shown net of accumulated amortization of $66.8 
million at January 2, 1999 and $66 million at January 3, 1998.  
Amortization, generally based on a three-year straight-line basis, was 
$31.4 million in 1998, $27.6 million in 1997 and $20 million in 1996.  All 
other research and development costs are expensed as incurred.  In 1998 
and 1996, the Company removed from its balance sheet capitalized software 
costs which had an original cost of $26 million and $40 million, 
respectively, and were fully amortized.  In addition, the Company wrote 
off capitalized software with a net book value of approximately $2.5 
million as part of the restructuring in the second quarter of 1998.  This 
did not affect the realizable value of the Company's remaining software 
products.  

    Additionally, the Company maintains strategic relationships with 
industry-leading manufacturers of components, systems and software.  In 
1998 and 1997, the Company did not enter into any material joint 
development agreements with vendors that involve ownership interests to be 
retained in developed technology, nor has it entered into any agreements 
that involve revenue sharing arrangements or any funding responsibilities.  
Amounts related to joint development relationships included in the 
Company's research and development costs and expenses for 1998 were 
insignificant.

    Income Taxes.  The Company's general practice is to reinvest the 
earnings of its foreign subsidiaries in those operations, unless it would 
be advantageous to the Company to repatriate the foreign subsidiaries' 
retained earnings.

    Foreign Currency Translation.  The financial statements and 
transactions of the Company's foreign subsidiaries are maintained in their 
functional currencies and translated into U.S. dollars for purposes of 
consolidation.  Translation adjustments are accumulated as a separate 
component of shareholders' equity.  Gains and losses resulting from 
transactions denominated in a currency other than an entity's functional 
currency are included in other net expense in the consolidated statements 
of operations.  Net losses aggregating $1.2 million, $1.6 million and $0.8 
million for 1998, 1997 and 1996, respectively, were realized from such 
transactions. 

    Hedging of Foreign Currency Transactions.  A substantial portion of 
the Company's business is conducted overseas through its foreign 
subsidiaries, primarily in Europe.  This exposes the Company to risks 
associated with foreign currency rate fluctuations which can impact the 
Company's revenue and net income.  To mitigate this risk the Company 
enters into foreign currency transactions with foreign and domestic banks 
on a continuing basis in amounts and timing consistent with the underlying 
currency exposure so that gains and losses on these transactions offset 
gains and losses on the underlying exposure.  The Company does not engage 
in any speculative trading activity.  See related discussion in Note 4.  

    In addition to the arrangements described in Note 4, at January 2, 
1999, the Company also has forward contracts denominated in Japanese Yen, 
Australian Dollars and New Zealand Dollars with a contract amount of 
approximately $2.2 million, $4.1 million and $1.9 million, respectively.  
These forward contracts are used to hedge certain intercompany payables.  
Gains and losses on such contracts have not been significant to date.  The 
Company also has range forward option contracts denominated in British 
Pounds with a contract amount of approximately $129.1 million.  These 
option contracts are used to hedge the cost of goods sold for the 
Company's United Kingdom operations.  There have been no gains or losses 
on these contracts to date.

    Per Share Information. Basic earnings per share is calculated based 
on income available to common shareholders and the weighted-average number 
of common shares outstanding during the reported period.  Diluted earnings 
per share includes additional dilution from the effect of potential common 
stock issuances, such as stock issuable pursuant to the exercise of stock 
options and warrants outstanding and the conversion of debt.  

<TABLE>

    The following table is a reconciliation of the basic and diluted 
earnings per share computations:

(in thousands, except per share amounts)

<CAPTION>

                                       Income (Loss)                      Shares                    Per-Share
                                        (Numerator)                   (Denominator)                   Amount

                               Fiscal      Fiscal     Fiscal    Fiscal   Fiscal   Fiscal     Fiscal   Fiscal  Fiscal
                                1998        1997       1996      1998     1997     1996       1998     1997    1996

<S>                            <C>         <C>        <C>       <C>      <C>      <C>        <C>      <C>     <C>

Basic EPS
  Income (loss) available to 
    common shareholders       $(52,519)   $ 38,687   $ 7,771    43,561   37,899   33,641    $(1.21)   $1.02   $0.23

Effect of Dilutive Securities
Stock options                                                             2,653      723
Employee stock purchase plan                                                156       55
Debentures, if dilutive                        116                          144

Diluted EPS
  Income (loss) available to
    common shareholders + 
    assumed conversions       $(52,519)   $ 38,803   $ 7,771    43,561   40,852   34,419    $(1.21)   $0.95   $0.23

</TABLE>

    Consolidated Statement of Cash Flows.  Total cash expenditures for 
income taxes were $5.2 million, $3.7 million and $5.9 million during 1998, 
1997 and 1996, respectively.  Interest paid does not differ materially 
from interest expense.  

    Non-cash investing and financing activities include the following: 
1997 - $9.1 million ($8.9 million, net of related expenses) of Convertible 
Debentures were converted into 576,000 shares of common stock.

    Management Estimates.  The preparation of financial statements in 
conformity with generally accepted accounting principles requires 
management to make estimates and assumptions that affect the reported 
amounts of assets and liabilities and disclosure of contingent assets and 
liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period.  Actual 
results could differ from these estimates.  Significant estimates and 
judgments made by management of the Company include matters such as 
collectibility of accounts receivable, realizability of inventory and 
recoverability of capitalized software, prepaid royalties and deferred tax 
assets.

    Reclassifications.  Certain prior year amounts have been reclassified 
to conform to fiscal 1998 presentation.  These changes had no impact on 
previously reported results of operations or shareholders' equity.

    New Accounting Pronouncements.  During the first quarter of the year 
ended January 2, 1999, the Company adopted Statement of Financial 
Accounting Standards No. 130, Reporting Comprehensive Income (FAS 130) as 
issued by the Financial Accounting Standards Board (FASB).  Comprehensive 
income is defined by FAS 130 as the changes in equity of a business 
enterprise during a period that result from transactions and other 
economic events and circumstances from non-shareholder sources.  It 
includes all changes in equity during a period except those resulting from 
investments by shareholders.  Consequently, the Company has reported its 
Foreign Currency Translation Adjustment, as required by FAS 130, as 
comprehensive income in the appropriate consolidated financial statements 
presented herein.

    In March 1998, the American Institute of Certified Public Accountants 
issued Statement of Position 98-1, Accounting for the Costs of Computer 
Software Developed or Obtained for Internal Use (SOP 98-1).  This 
Statement provides authoritative guidance on when internal-use software 
costs should be capitalized and when these costs should be expensed as 
incurred.  The Company adopted SOP 98-1 in 1998.  During the year ended 
January 2, 1999, the Company capitalized $9.9 million of such costs in 
accordance with this guidance.

    In 1998, the Company adopted Statement of Financial Accounting 
Standards No. 131, Disclosures about Segments of an Enterprise and Related 
Information (FAS 131).  This Statement supersedes FAS 14, Financial 
Reporting for Segments of a Business Enterprise, replacing the "industry 
segment" approach with the "management" approach.  The management 
approach designates the internal organization that is used by management 
for making operating decisions and assessing performance as the source for 
the Company's reportable segments.  This Statement also requires 
disclosures about products and services, geographic areas and major 
customers.  The adoption of FAS 131 did not affect results of operations 
or financial position but did affect the disclosure of segment information 
(see Footnote 9 on "Segment Reporting").

    In June 1998, the FASB issued Statement of Financial Accounting 
Standards No. 133, Accounting for Derivative Instruments and Hedging 
Activities (FAS 133).  This Statement 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.  It requires that an entity 
recognize all derivatives as either assets or liabilities in the balance 
sheet and measure those instruments at fair value.  Changes in the fair 
value of derivatives are recorded each period in current earnings or other 
comprehensive income, depending on whether a derivative is designated as 
part of a hedge transaction and, if it is, the type of hedge transaction.  
This statement is effective for fiscal years beginning after June 15, 1999 
(January 1, 2000 for the Company).  The Company is currently assessing the 
impact that the adoption of FAS 133 will have on its consolidated 
financial statements.

2.  INVENTORIES 

(in thousands)
                               January 2,          January 3,
                                  1999                1998          
     
          Raw materials         $ 14,996           $  16,375     
          Work-in-progress         1,403               3,155
          Finished goods          69,934              92,698     
                                $ 86,333           $ 112,228     

    Finished goods inventory includes evaluation systems aggregating 
$25.8 million and $53.7 million as of January 2, 1999 and January 3, 1998, 
respectively.  Such systems are located at potential customer sites for 
demonstration.
                                                           
3.  PROPERTY AND EQUIPMENT 

(in thousands)
                                          January 2,      January 3,
                                             1999            1998          

          Land                            $   6,307       $   5,037     
          Operational equipment             230,449         209,372
          Furniture and office equipment     86,069          89,569
          Leasehold improvements             27,498          22,889
                                            350,323         326,867
          Less accumulated depreciation 
            and amortization               (216,492)       (192,139)
                                          $ 133,831       $ 134,728       
                                                                        
    Depreciation and amortization of intangibles charged to expense 
totaled $56.9 million in 1998, $55.2 million in 1997 and $44.9 million in 
1996.  

4.  NOTES PAYABLE 

    The Company has an unsecured line of credit agreement with a group of 
banks which provides short-term borrowings up to $80 million.  The line of 
credit agreement contains financial covenants, including covenants 
relating to net worth, ratio of liabilities to net worth and limitations 
on net operating losses, and prohibits the Company from paying dividends 
without the group of banks' consent.  Individual borrowings on the credit 
line have maturities of three months or less.  The line of credit 
agreement extends through April 1, 2001.  There were no borrowings 
outstanding under the line of credit at January 2, 1999 or January 3, 
1998.  

    The Company has a short-term borrowing agreement with a foreign bank 
as a hedge to cover certain foreign currency exposures.  Borrowings under 
the agreement are denominated in various foreign currencies with terms of 
fourteen days to three months.  Proceeds from the borrowings are converted 
into U.S. dollars and placed in a term deposit account with the foreign 
bank.  The deposits, which are classified as restricted deposits in the 
accompanying consolidated balance sheets, are pledged to the foreign bank 
so long as borrowings under the agreement are outstanding.  During July 
1998, the Company re-negotiated the agreement to renew automatically on an 
annual basis, unless specifically cancelled.  The foreign bank, without 
cause, can terminate the agreement at any time.  At January 2, 1999, 
maximum borrowings allowed under the agreement were $85.1 million.  
Amounts outstanding were $28.3 million and $68.8 million at January 2, 
1999 and January 3, 1998, respectively.  The maximum borrowing limit is 
denominated in specified foreign currencies and fluctuates with the change 
in foreign exchange rates.  The average interest rate on these borrowings 
at January 2, 1999 was 4.7%.  

    In addition to the above borrowing agreements, the Company has 
entered into certain other miscellaneous borrowing arrangements with a 
foreign bank.  Amounts outstanding were $1.6 million and $1.1 million at 
January 2, 1999 and January 3, 1998, respectively.  The interest rate on 
these borrowings was 1.725% at January 2, 1999.

5.  OBLIGATIONS UNDER CAPITAL LEASES 

    The Company leases certain equipment under five-year capital leases.  
These lease terms require maintenance of certain financial ratios and 
generally include a fair market value purchase option at the end of the 
lease.  These leased assets are pledged as security for capital lease 
obligations.

    In addition, the Company entered into a sales-leaseback transaction 
in September 1996 under which certain operating equipment with a net book 
value of $12.2 million was sold for $15.3 million and then leased back 
under a capital lease.  The related lease terms stipulate monthly payments 
ranging from $274,000 to $341,000 over the five-year lease term beginning 
September 1996 at an annual interest rate of 7.4%.  The resulting gain of 
$3.1 million has been recorded under "Other Accrued Expenses" and is 
being amortized in proportion to the related equipment depreciation over 
three years.  The terms of the lease include an asset buy-back provision 
at the end of the lease for the then fair market value of the assets at 
the Company's option.  

    Future minimum lease payments are as follows:

(in thousands)

                         1999                   $ 4,029
                         2000                     4,107
                         2001                     2,702
                         2002                        --
                         2003                        --
    Total minimum lease payments                 10,838

    Less amount representing interest            (1,038)

    Present value of minimum lease payments     $ 9,800

6.  OPERATING LEASE COMMITMENTS 

    The Company entered into two operating lease transactions during 
fiscal years 1997 and 1998 for certain buildings on the Beaverton campus.  
These two lease transactions involve a newly constructed facility to be 
completed and occupied during 1999 as well as three buildings previously 
occupied by the Company under operating leases.  According to the terms of 
the agreements, the buildings were purchased by a third party from the 
previous lessor and then leased back to the Company.  Both leases give the 
Company the option to extend the lease terms for one-year periods or 
purchase the buildings at the end of the lease term at fair market value.  
In addition, both leases provide Sequent the option to terminate the lease 
in order to purchase the buildings at any time.

    The first operating lease transaction was entered into on September 
4, 1997 under a five-year agreement ending August 1, 2002 for the 
construction, sale and lease of a new building.  Interest on the 
construction of the building is capitalized into the financing instrument 
throughout construction until completion.  The lease payments commence 
upon completion and occupation of the building, currently estimated at 
August, 1999.  The cost of the property to be financed is estimated to be 
$17.5 million.  Lease payments are due monthly at a rate of 25 basis 
points above LIBOR.  Future payments included in the table below are 
calculated through August 1, 2002 with an assumed weighted average 
interest rate of 6% for 1999 and 6.5% for 2000 through 2002, resulting in 
monthly payments ranging from $87,500 to $96,250.  Actual operating lease 
payments are variable based on LIBOR and will fluctuate with actual market 
rates.

    On April 5, 1998, the Company entered into a second operating lease 
transaction to lease three currently occupied buildings based on a total 
cost of $25 million with lease terms extending through April 1, 2003.  The 
resulting operating lease payments are payable monthly at interest rates 
ranging from 25 to 200 basis points above LIBOR.  At January 2, 1999, the 
effective rates ranged from 5.80% to 7.55%.  Total operating lease 
expenses for the year ended January 2, 1999 were $1.1 million.  Future 
payments included in the table below are calculated through April 1, 2003 
with an assumed weighted average interest rate of 6% for 1999 and 6.5% for 
2000 through 2003.  The resulting monthly payments range from $102,239 to 
$135,850 over the lease term.  Future operating lease payments are 
variable based on LIBOR and will fluctuate with actual market rates.

    Future minimum lease payments under operating leases which include 
office space, equipment and manufacturing facilities are as follows:

(in thousands)    
                        1999                 $ 20,686     
                        2000                   17,231     
                        2001                   13,547     
                        2002                    9,050     
                        2003 and thereafter    13,554
                                             $ 74,068     

    Total rent expense for operating leases was $20.0 million, $19.1 
million and  $17.4 million in 1998, 1997 and 1996, respectively.

7.  INCOME TAXES

    The Company recorded a $23.6 million benefit for income taxes in 1998 on a 
net loss before tax of $76.1 million.  The difference between the statutory rate
and the effective tax rate is principally due to a valuation allowance for the
potential expiration of certain tax attributes carried forward from prior years 
offset by the benefit from the research tax credit and the Company's Foreign 
Sales Corporation.  The 1998 effective tax rate benefit of 31.0% compares to 
effective tax rate expense of 23.4% in 1997 and 27.2% in 1996.

    Pre-tax income (loss) from continuing operations for the last three fiscal 
years was taxed under the following jurisdictions: 

(in thousands)     


                            Fiscal      Fiscal      Fiscal
                             1998        1997        1996

    Domestic              ($88,822)    $39,603      $5,593 
    Foreign                 12,751      10,909       5,083 

    Total                 ($76,071)    $50,512     $10,676 



    The provision (benefit) for income taxes was as 
follows:


                            Fiscal      Fiscal      Fiscal
                             1998        1997        1996
    Current:
      Federal              ($3,899)     $6,808      $  789 
      Foreign                5,602       4,441       3,109 
      State                    150         449         164 
                             1,853      11,698       4,062 
    Deferred:
      Federal              (25,582)        317        (900)
      Foreign                  177        (211)       (257)
      State                     --          21          --   
                           (25,405)        127      (1,157)
    Total provision
      (benefit)           ($23,552)    $11,825      $2,905 


    Deferred tax liabilities (assets) are recorded within Accounts Payable and 
Other and Other Assets, respectively in the accompanying consolidated balance 
sheets.  They are comprised of the following components: 
                                        
(in thousands)     
                                               Fiscal        Fiscal
                                                1998          1997
          
    Capitalized software                      $ 29,145      $ 25,119 
    Other                                        1,649         2,217 
    Gross deferred tax liabilities              30,794        27,336 
          
    Net operating loss carryforwards:          
      Domestic                                 (47,646)      (18,921)
      Foreign                                   (4,522)       (4,897)
    Credit carryforwards                       (22,433)      (18,626)
    Expenses not currently deductible           (7,346)       (6,741)
    Depreciation                                (2,442)       (1,779)
    Revenue currently taxable                   (2,008)       (2,008)
    Inventory basis differences                 (4,750)       (2,499)
    Restructuring costs                         (9,982)           -- 
    Gross deferred tax assets                 (101,129)      (55,471)
    Deferred tax asset valuation allowance      43,921        27,126 
    Net deferred tax asset                   ($ 26,414)     ($ 1,009)
     

    The provision for income taxes differs from the amount of income taxes 
determined by applying the U.S. statutory federal tax rate to income (loss)
from continuing operations due to the following: 

                                          Fiscal      Fiscal      Fiscal
                                           1998        1997        1996
               
Statutory federal tax rate                (35.0)%      35.0%       35.0%
State taxes, net of federal benefit        (4.2)        4.2         4.2
Tax provision (benefit) from Foreign                
  Sales Corporation                        (2.2)       (4.8)       (6.8)
R&D Credit                                 (4.3)       (4.6)          -
Tax provision on foreign earnings           1.7         0.3        (0.9)
Realized benefit from net               
  operating losses                            -        (2.2)       (1.3)
Deferred tax asset valuation allowance     10.2           -           -
Other, net                                  2.8        (4.5)       (3.0)     
               
                                          (31.0)%      23.4%       27.2%
     
                                                                        
    The deferred tax asset valuation allowance in fiscal years 1996 - 1998 is
attributed to U.S. federal, state and foreign deferred tax assets.  Management
believes sufficient uncertainty exists with regard to the realizability of such
assets that a valuation allowance of $43.9 million has been provided at January
2, 1999.  When and if these reserved deferred tax assets are ultimately 
realized, $22.6 million will reduce the Company's federal and state tax 
provision and $21.3 million will be credited to paid-in capital (related to 
stock option deductions).

    In accordance with FAS 109, the valuation allowance is allocated pro-rata
to federal, state, and foreign current and non-current deferred tax assets. 

    The Company has net operating losses carried forward both domestically and
in certain foreign jurisdictions.  The domestic net operating losses expire from
2006 to 2018.  Certain foreign net operating losses expire in 2002 through 2004
while others have no expiration date.

    The Company has accumulated unused research and experimentation credits of 
$11.2 million for income tax purposes.  These credits expire from 1999-2013.  
The Company also has Alternative Minimum Tax Credits (AMT) which may be carried
forward indefinitely and certain state tax credits which expire from 1999-2003.

    The Company may realize tax benefits as a result of the exercise of certain 
employee stock options.  For financial reporting purposes, any reduction in 
income tax obligations as a result of these tax benefits is credited to paid-in
capital.  During 1998, 1997 and 1996, $612,000, $3.0 million and $175,000 of 
benefits were credited to paid-in capital, respectively, with a related 
reduction in current taxes payable.  

    An income tax provision has not been recorded for U.S. or additional 
foreign taxes on undistributed earnings of foreign subsidiaries as the 
undistributed earnings have been and will continue to be reinvested in 
operations outside the United States.

8.  SHAREHOLDERS' EQUITY 

    Common Stock.  During 1998, the Company announced a plan to 
repurchase up to 4,000,000 shares of its outstanding common stock.  As of 
January 2, 1999, 1,733,500 shares were actually repurchased.  In 1997, the 
Company sold approximately 5.7 million shares of common stock in an equity 
offering.  Net proceeds to the Company, after deducting the underwriting 
discount and offering expenses, were approximately $148.5 million.  Also 
in 1997, $9.1 million ($8.9 million, net of related expenses) of 
Convertible Debentures was converted into 576,000 shares of common stock. 

    Stock Compensation Plans.  At January 2, 1999, the Company had the 
following stock-based compensation plans:

Stock Option Plans

    At January 2, 1999, the Company had options outstanding to employees 
and non-employees under the following Stock Option Plans:  1984 Employee 
Stock Option Plan and 1984 Nonstatutory Stock Option Plan (the "1984 
Plans"), the 1987 Employee Stock Option Plan and 1987 Nonstatutory Stock 
Option Plan (the "1987 Plans"), the 1989 Stock Incentive Plan (the "1989 
Plan"), the 1995 Stock Incentive Plan, the 1996 Stock Option Plan and the 
1997 Stock Option Plan.  Options granted after May 18, 1995 were made 
under the 1995 Stock Incentive Plan and the 1996 and 1997 Stock Option 
Plans.  As of January 2, 1999, the Company has reserved a total of 
19,830,606 shares of common stock for issuance under these plans, of which 
10,440,336 shares were outstanding at January 2, 1999.  Employee options 
vest over varying time periods, generally ranging from one to four years, 
as long as, in the case of employees, the optionee remains employed by 
Sequent.  Option prices generally have been at 85% or greater of the fair 
market value of the common stock on the date of grant.  Options generally 
expire ten years from the date of the grant.

Employee Stock Purchase Plan

    In September 1987, Sequent established an Employee Stock Purchase 
Plan.  Under the plan, Sequent is authorized to grant rights to purchase 
up to 8,700,000 shares of common stock in a series of eighteen-month 
offerings.  At January 2, 1999, there were 1,825,698 shares available for 
future purchase.  Substantially all employees are eligible to receive 
rights under the plan.  The purchase price is the lesser of 85% of the 
fair market value of the common stock on the date of commencement of the 
offering or on the date of purchase.  During 1998, 1997 and 1996, Sequent 
issued 1,870,876, 1,127,428 and 682,864 shares under the plan, 
respectively.

    Statement of Financial Accounting Standards No. 123.  During 1995, 
the FASB issued FAS 123, Accounting for Stock Based Compensation, which 
defines a fair value based method of accounting for an employee stock 
option or similar equity instrument and encourages all entities to adopt 
that method of accounting for all of their employee stock compensation 
plans.  However, it also allows an entity to continue to measure 
compensation cost related to stock options issued to employees under these 
plans using the method of accounting prescribed by the Accounting 
Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to 
Employees.  Entities electing to remain with the accounting in APB 25 must 
make pro forma disclosures of net income and earnings per share, as if the 
fair value based method of accounting defined in this Statement has been 
applied.

    The Company has elected to continue to account for stock-based 
compensation using the intrinsic value method prescribed in APB 25 and 
related Interpretations.  Accordingly, no compensation cost has been 
recognized in the consolidated statements of operations for its stock-
based compensation plans other than for performance-based awards. 

    Had compensation cost for the other stock-based compensation plans 
been determined based on the fair value at the grant dates for awards 
under these plans consistent with the method of FAS 123, Accounting for 
Stock-Based Compensation, the Company's net income and earnings per share 
would have been reduced to the pro forma amounts indicated below:

(in thousands, except per share amounts)

                                        Fiscal      Fiscal      Fiscal
                                         1998        1997        1996

Net income (loss):     As reported   $ (52,519)    $ 38,687    $ 7,771
                       Pro forma       (71,000)      28,981       (709) 


Net income (loss)               
 per share - basic:    As reported   $   (1.21)    $   1.02    $  0.23
                       Pro forma         (1.63)        0.76      (0.02)

Net income (loss)
 per share - diluted:  As reported     $ (1.21)    $   0.95    $  0.23
                       Pro forma         (1.63)        0.73      (0.02)

    
    The fair value of each option grant is estimated on the date of grant 
using the Black-Scholes option-pricing model with the following weighted-
average assumptions used for grants in 1998, 1997 and 1996:  

                                   Fiscal      Fiscal      Fiscal
                                    1998        1997        1996

       Risk-free interest rate     4.84%       6.15%       6.05%     
       Expected dividend yield       --          --          --     
       Expected lives              3 years     3 years     3 years     
       Expected volatility           81%         56%         50%     

    The fair value of the employees' purchase rights was estimated using 
the Black-Scholes model with the following assumptions for 1998, 1997 and 
1996:
                                   Fiscal      Fiscal      Fiscal
                                    1998        1997        1996

       Risk-free interest rate     5.08%       5.74%       5.58% 
       Expected dividend yield       --          --          --
       Expected lives              1 year      1 year      1 year
       Expected volatility           81%         56%         50%

    The weighted-average per share fair value of those purchase rights 
granted in 1998, 1997 and 1996 was $11.33, $15.20 and $13.15, 
respectively.

    A summary of the status of the Company's stock option plans as of 
January 2, 1999, January 3, 1998 and December 28, 1996, and changes during 
the years ending on those dates is presented below:

(in thousands, except per share amounts)

<TABLE>

<CAPTION>

                                           Fiscal                        Fiscal                        Fiscal
                                            1998                          1997                          1996
                                              Weighted-Average              Weighted-Average              Weighted-Average
                                    Shares       per share        Shares       per share        Shares       per share
                                 under option  Exercise Price  under option  Exercise Price  under option  Exercise Price

<S>                              <C>          <C>              <C>           <C>             <C>           <C>

Outstanding at beginning 
 of year                             8,276       $14.77            6,909       $12.27            5,068       $14.26
Granted:
  Price = Fair Value                  2,562        13.02            2,812        18.39           3,353        12.60
  Price < Fair Value                    802        12.51              829        18.14           1,196        11.12
  Price > Fair Value                  2,604        13.00               --           --              --           --
Exercised                              (274)       11.21           (1,209)       12.01            (196)        8.53
Forfeited                            (3,530)       16.82           (1,065)       13.83          (2,512)       16.55
Outstanding at
  end of year                        10,440        13.12            8,276        14.77           6,909        12.27
Options exercisable
  at year-end                         3,721                         2,370                        1,446
     
Weighted-average per share fair value
  of options granted during the year               $4.82                        $ 8.35                       $ 3.69

</TABLE>

The following table summarizes information about stock options outstanding 
at January 2, 1999:

<TABLE>

<CAPTION>

                      OPTIONS OUTSTANDING                          OPTIONS EXERCISABLE
                              
                                                                              Weighted-
                   Number    Weighted-Average  Weighted-Average    Number      Average
   Range of      Outstanding    Remaining         per share     Exercisable   per share
Exercise Prices   at 1/2/99  Contractual Life   Exercise Price   at 1/2/99  Exercise Price

<S>              <C>         <C>               <C>              <C>         <C>

    $0 - $ 9.00   1,507,229     8.6 years          $  8.68         197,882     $  8.73
 $9.09 - $11.25   1,631,244     7.4 years            10.44         953,892       10.62
$11.26 - $12.31     938,168     5.1 years            11.99         536,625       12.11
$12.33 - $13.00   2,652,942     8.3 years            12.98         133,853       12.68
$13.07 - $14.88   1,623,345     6.0 years            13.99       1,066,432       13.98
$14.93 - $21.38   2,020,170     8.1 years            18.33         817,759       18.84
$21.41 - $24.81      67,238     7.4 years            21.88          14,700       22.42

 $0.00 - $24.81  10,440,336     7.5 years          $ 13.12       3,721,143     $ 13.62

</TABLE>

9.  SEGMENT REPORTING 

    In 1998, the Company adopted Statement of Financial Accounting 
Standards No. 131, Disclosures about Segments of an Enterprise and Related 
Information (FAS 131).  This Statement supersedes FAS 14, Financial 
Reporting for Segments of a Business Enterprise, replacing the "industry 
segment" approach with the "management" approach.  The management 
approach designates the internal organization that is used by management 
for making operating decisions and assessing performance as the source for 
the Company's reportable segments.

    The Company has determined that its reportable segments are those 
that are based on the Company's primary basis of organization and method 
of internal reporting - (1) Product, (2) Customer Services (CS), (3) 
Professional Services (PS) and (4) Research and Development (R&D).

    The Company is organized primarily on the basis of products and 
services.  Its product segment offers large scalable computer systems, 
which are marketed to organizations spanning diverse industries.  Customer 
Services offers customers a wide range of support services, including 
system, environmental, business protection and management.  The Company's 
Professional Services segment offers services designed to support the 
customer through every phase of a project, from planning and architecture 
to technology deployment and ongoing consulting and support.  Research and 
Development has been considered a reportable segment because its 
activities are an integral component of the Company's business and its 
operations are material to consolidated financial results.

    The accounting policies of the segments are the same as those 
described in the "Summary of Significant Accounting Policies."  The 
Company's management evaluates the performance of its segments and 
allocates resources to them based on revenue and margin.  There are no 
intersegment revenues.  Asset information by reportable segment is not 
reported, since the Company does not produce such information internally. 
Capitalized software amortization is not included in research and 
development expenses as it is included in cost of products sold which is 
used for evaluating the Company's product segment margin.

    The tables below present information about reported segments for the 
three years ended January 2, 1999, January 3, 1998 and December 28, 1996 
and include a reconciliation of segment activity to consolidated net 
income before the provision for income taxes.

Fiscal year ended January 2, 1999:

<TABLE>

<CAPTION>

                                   Product       PS        CS       R&D   Consolidated

<S>                               <C>        <C>       <C>        <C>     <C>

Revenue                           $ 509,830  $ 97,422  $ 176,904           $ 784,156
Cost of products sold               311,705                                  311,705
Cost of service revenue                        92,065    106,728             198,793
Gross margin                        198,125     5,357     70,176             273,658
R&D expenses                                                      74,808      74,808
Selling, general & administrative                                            215,336
Restructuring charges                                                         61,372
Operating loss                                                               (77,858)
Interest income                                                                9,202
Interest expense                                                              (4,059)
Other expense, net                                                            (3,356)
Loss before benefit from                          
  income taxes                                                             $ (76,071)

</TABLE>


Fiscal year ended January 3, 1998:

<TABLE>

<CAPTION>
                               
                                   Product       PS         CS      R&D   Consolidated

<S>                               <C>        <C>       <C>        <C>     <C>

Revenue                           $ 600,496  $ 75,695  $  157,695          $ 833,886
Cost of products sold               309,016                                  309,016
Cost of service revenue                        77,246      94,349            171,595
Gross margin                        291,480    (1,551)     63,346            353,275
R&D expenses                                                       65,414     65,414
Selling, general & administrative                                            234,037
Operating income                                                              53,824
Interest income                                                                5,096
Interest expense                                                              (6,086)
Other expense, net                                                            (2,322)
Income before provision for                         
  income taxes                                                             $  50,512

</TABLE>


Fiscal year ended December 28, 1996:

<TABLE>

<CAPTION>
                                   Product       PS        CS       R&D   Consolidated

<S>                               <C>        <C>       <C>         <C>    <C>

Revenue                           $ 414,418  $ 56,488  $ 124,456           $ 595,362
Cost of products sold               197,702                                  197,702
Cost of service revenue                        62,824     77,159             139,983
Gross margin                        216,716    (6,336)    47,297             257,677
R&D expenses                                                       53,733     53,733
Selling, general & administrative                                            191,069
Operating income                                                              12,875
Interest income                                                                3,007
Interest expense                                                              (3,187)
Other expense, net                                                            (2,019)
Income before provision for                                                $  10,676
  income taxes                         

</TABLE>

Information concerning principal geographic areas is as follows:

                                   Fiscal        Fiscal        Fiscal
                                    1998          1997          1996

Revenue from external customers:               
  United States                  $ 372,627     $ 449,355     $ 270,571
  United Kingdom                   300,851       268,832       205,481
  Other foreign                     94,725        93,656        98,358
  Export                            15,953        22,043        20,952
Total                            $ 784,156     $ 833,886     $ 595,362
               
Identifiable assets:               
  United States                  $ 594,715     $ 682,470     $ 440,145
  United Kingdom                   123,346       144,019       100,476
  Other foreign                     78,054        60,188        63,006
Total                            $ 796,115     $ 886,677     $ 603,627

    Revenues are attributed to geographic areas based on the location of 
the identifiable assets producing the revenues.  Foreign revenue is that 
which is produced by identifiable assets located in foreign countries 
while export revenue is that which is generated by identifiable assets 
located in the United States.  Intercompany sales between geographic 
areas, primarily from the United States to Europe, were $157.5 million 
during 1998, $195.5 million during 1997 and $155.7 million during 1996.

10. FAIR VALUE OF FINANCIAL INSTRUMENTS 

    Statement of Financial Accounting Standards No. 107, Disclosures 
About Fair Value of Financial Instruments, requires disclosure of the fair 
value of certain financial instruments.

    Cash and cash equivalents, restricted deposits, receivables, notes 
payable, accounts payable and other, and current obligations under capital 
leases are reflected in the consolidated financial statements at book 
value, which approximates fair value, because of the short-term maturity 
of these instruments.

    The fair value of long-term obligations under capital leases was 
estimated by discounting the future cash flows using market interest rates 
and does not differ significantly from the amount reflected in the 
consolidated financial statements.

    Fair value estimates are made at a specific point in time, based on 
relevant market information about the financial instrument.  These 
estimates are subjective in nature and involve uncertainties and matters 
of significant judgment and therefore cannot be determined with precision.  
Changes in assumptions could significantly affect the estimates.

11. RESTRUCTURING

    During the second quarter of 1998, the Company recorded restructuring 
charges of $62.9 million in connection with management's decision to 
accelerate changes in its business model to leverage the strength of its 
technology roadmap and market position.  The restructuring charge was 
reduced during the third and fourth quarters by estimate revisions 
totalling $1.5 million.  The majority of these revisions were adjustments 
to prepaid software licenses and facilities.  As part of the restructuring 
process, which was substantially completed during the second quarter of 
1998, the Company reorganized its operations to revise the focus of its 
business strategy and broaden its line of Intel-based servers.  As part of 
the restructuring efforts, the Company expanded its product offerings, 
including its new Xeon-based NUMA product and also NUMACenter, both of 
which were formally introduced into the marketplace in the latter part of 
1998.  The restructuring charges of $62.9 million included employee 
termination and other related costs ($7.2 million); facilities and office 
space costs ($13.7 million); write-offs of non-strategic assets, 
principally prepaid software licenses ($27.2 million), capital assets 
($7.9 million), capitalized software ($2.5 million), goodwill ($2.5 
million), and other assets, principally prepaid expenses ($1.9 million).

    The employee termination costs resulted from the elimination of 265 
positions worldwide.  The employee groups impacted by the eliminations 
encompassed all functions within the Company.  All termination costs 
pertaining to the eliminated positions are included as restructuring costs 
in the accompanying Statements of Operations.  Approximately 74% of the 
employee termination costs accrued during the second quarter of 1998 were 
paid as of January 2, 1999.  Approximately 24% of the accrued costs were 
written off by the Company during 1998 and the remainder will be paid in 
1999.

    Facilities costs represent expenses associated with excess office 
space and related fixed costs for the Company's headquarter and field 
office locations.  The amount written off was determined using an analysis 
of individual specific lease terms, estimated sub-lease income to be 
realized and office headcount for unutilized facilities.

    The majority of capital asset write-offs represent retirements of 
hardware and software no longer being used for customer demonstrations and 
showcases due to the strategic product shift associated with the 
restructure.  The method of determining fair value of costs written off 
was the net book value recorded at the time of the restructuring.

<TABLE>

    The following table presents a summary of the restructuring charges recorded during 1998 and the 
resulting net balance sheet amounts recorded as of January 2, 1999.  The balance of accrued restructuring 
costs of $16.5 million at January 2, 1999 is included in Accounts Payable and Other in the accompanying 
balance sheet.

<CAPTION>

(dollars in millions)

                                          Second                                    Third
                         Restructuring    Quarter     Write-offs/   Balance at     Quarter     Write-offs/    Balance at
                             Costs      Expenditures  Adjustments  July 4, 1998  Expenditures  Adjustments  October 3, 1998

<S>                      <C>            <C>           <C>          <C>           <C>           <C>          <C>

Employee termination and
  related costs             $  7.2        $ (2.5)      $  (0.3)       $  4.4       $ (2.5)       $ (0.2)        $  1.7
Prepaid software licenses     27.2             -         (24.9)          2.3           -           (0.6)           1.7
Facilities                    13.7          (0.1)            -          13.6         (0.7)          0.1           13.0
Capital assets                 7.9             -          (7.9)            -            -           0.1            0.1
Capitalized software           2.5             -          (2.5)            -            -             -              -
Goodwill                       2.5             -          (2.5)            -            -             -              -
Other assets                   1.9             -          (1.9)            -            -             -              -
                            $ 62.9        $ (2.6)      $ (40.0)       $ 20.3       $ (3.2)       $ (0.6)        $ 16.5
</TABLE>

<TABLE>

<CAPTION>

                                          Fourth
                                          Quarter     Write-offs/    Balance at
                                        Expenditures  Adjustments  January 2, 1999

<S>                                     <C>           <C>          <C>

Employee termination and
  related costs                           $ (0.3)      $  (1.2)       $  0.2
Prepaid software licenses                      -          (1.4)          0.3
Facilities                                  (0.7)          3.7          16.0
Capital assets                                 -          (0.1)            -
Capitalized software                           -             -             -
Goodwill                                    (0.1)          0.1             -
Other assets                                   -             -             -
                                          $ (1.1)      $   1.1        $ 16.5
</TABLE>


12. COMMITMENTS AND CONTINGENCIES

    On January 11, 1999, the Company announced that it selected EDS to be 
its North American information technology (IT) provider.  Under the terms 
of the agreement, EDS will manage all IT infrastructure and operations 
support for Sequent's North American facilities, serving more than 1,800 
users.  The Company has also appointed EDS to manage a full spectrum of IT 
customer support services, including data center, applications, network 
and desktop infrastructure management.  The majority of Sequent's IT 
employees will become employees of EDS.  Under the 10-year agreement, 
which is effective January 1, 1999, Sequent is committed to purchase 
services from EDS for approximately $13 million per year.  Management 
anticipates that with the services provided by EDS, its IT operations will 
be optimized and will result in reductions in future operating expenses. 

    Lawsuits arise during the normal course of business.  In the opinion 
of management, none of the pending lawsuits will result in a significant 
impact on the consolidated results of operations or financial position.  




REPORT OF INDEPENDENT ACCOUNTANTS 


To the Board of Directors and Shareholders of 
Sequent Computer Systems, Inc.  


    In our opinion, the accompanying consolidated balance sheets and the 
related consolidated statements of operations, of shareholders' equity and 
of cash flows present fairly, in all material respects, the financial 
position of Sequent Computer Systems, Inc. and its subsidiaries at January 
2, 1999 and January 3, 1998, and the results of their operations and their 
cash flows for each of the three years in the period ended January 2, 
1999, in conformity with generally accepted accounting principles.  These 
financial statements are the responsibility of the Company's management; 
our responsibility is to express an opinion on these financial statements 
based on our audits.  We conducted our audits of these statements in 
accordance with generally accepted auditing standards which require that 
we plan and perform the audit to obtain reasonable assurance about whether 
the financial statements are free of material misstatement.  An audit 
includes examining, on a test basis, evidence supporting the amounts and 
disclosures in the financial statements, assessing the accounting 
principles used and significant estimates made by management, and 
evaluating the overall financial statement presentation.  We believe that 
our audits provide a reasonable basis for the opinion expressed above.  


PRICEWATERHOUSECOOPERS LLP

Portland, Oregon 
January 28, 1999


<TABLE>


                    QUARTERLY FINANCIAL DATA (unaudited)
                  (In thousands, except per share amounts) 

<CAPTION>                                        
                                                             Basic          Diluted
                    Total       Gross        Net        Earnings (Loss) Earnings (Loss
                   Revenue      Profit   Income (Loss)     Per Share       Per Share

<S>               <C>         <C>        <C>            <C>             <C>

Fiscal 1998
  First quarter   $ 183,068   $  72,826    $  4,022         $ 0.09          $ 0.09
  Second quarter    185,677      54,977     (58,752)         (1.34)          (1.34)
  Third quarter     201,398      67,882          38           0.00            0.00
  Fourth quarter    214,013      77,973       2,173           0.05            0.05
    Year          $ 784,156   $ 273,658    $(52,519)        $(1.21)*        $(1.21)*

Fiscal 1997
  First quarter   $ 157,374   $  68,120    $    708         $ 0.02          $ 0.02
  Second quarter    210,653      89,865       8,597           0.25            0.23
  Third quarter     207,320      87,026      10,298           0.26            0.24
  Fourth quarter    258,539     108,264      19,084           0.45            0.42
    Year          $ 833,886   $ 353,275    $ 38,687         $ 1.02*         $ 0.95*

Fiscal 1996
  First quarter   $ 120,745   $  51,481    $    598         $ 0.02          $ 0.02
  Second quarter    142,587      61,203       3,306           0.10            0.10
  Third quarter     148,785      66,132       1,355           0.04            0.04
  Fourth quarter    183,245      78,861       2,512           0.07            0.07
    Year          $ 595,362   $ 257,677    $  7,771         $ 0.23          $ 0.23

</TABLE>

    * The sum of quarterly earnings per share does not equal annual 
earnings per share as a result of the computation of quarterly versus 
annual average shares outstanding.


                       MARKET INFORMATION (unaudited) 

    Sequent's Common Stock has been traded on the NASDAQ National Market 
System since April 1987 under the symbol SQNT.  The following table sets 
forth, for the fiscal quarters indicated, the high and low sales prices 
for the common stock as reported on the NASDAQ National Market System.  
        
                                                  High          Low     
1998:
   First quarter                                $ 22.00       $ 16.00
   Second quarter                               $ 19.81       $ 11.88
   Third quarter                                $ 12.19       $  6.44
   Fourth quarter                               $ 12.88       $  5.75
1997:
   First quarter                                $ 20.00       $ 14.50
   Second quarter                               $ 21.63       $ 14.38
   Third quarter                                $ 30.63       $ 20.88
   Fourth quarter                               $ 26.88       $ 19.50
1996:
   First quarter                                $ 14.88       $ 10.31     
   Second quarter                               $ 14.88       $ 11.88
   Third quarter                                $ 13.88       $ 10.88
   Fourth quarter                               $ 18.25       $ 12.50


   At January 2, 1999, there were approximately 861 shareholders of 
record of the Company's common stock and 43.5 million shares outstanding.  
The Company has never paid cash dividends on its common stock.  The 
Company intends to retain earnings for use in its business and, therefore, 
does not anticipate paying cash dividends in the foreseeable future.  In 
addition, the Company's bank line of credit agreement prohibits payment of 
dividends without the lenders' consent.


                                                             EXHIBIT 21

              SEQUENT COMPUTER SYSTEMS, INC. - SUBSIDIARIES 



ENTERPRISE FINANCE COMPANY (Oregon)

SEQUENT EXPORT, INC. (Barbados)

DP APPLICATIONS, INC. (Oregon)

CANADA:

   SEQUENT COMPUTER SYSTEMS (CANADA) LIMITED

EUROPE:

   SEQUENT COMPUTER SYSTEMS LIMITED (United Kingdom)

   SEQUENT COMPUTER SYSTEMS A.B. (Sweden)

   SEQUENT COMPUTER SYSTEMS GmbH (Germany)

   SEQUENT COMPUTER SYSTEMS, S.A. (France)

   SEQUENT COMPUTER SYSTEMS, B.V. (Netherlands)

   SEQUENT COMPUTER SYSTEMS, spol. s r.o. (Czech Republic)

   OPEN TOOL INTERNATIONAL, B.V. (Netherlands)

   SEQUENT COMPUTER SYSTEMS S. r. I. (Italy)

   SEQUENT COMPUTER SYSTEMS CJSC (Russia)

JAPAN:

   SEQUENT COMPUTERS JAPAN CO., LTD

ASIA:

   SEQUENT COMPUTER SYSTEMS (N.Z.) LIMITED (New Zealand)

   SEQUENT COMPUTER SYSTEMS AUSTRALIA PTY. LIMITED

   SEQUENT COMPUTER SYSTEMS ASIA LIMITED (Hong Kong)

   SEQUENT COMPUTER SYSTEMS (SINGAPORE) PTE. LIMITED

   SEQUENT COMPUTER SYSTEMS KOREA LIMITED


                                                               EXHIBIT 23

                    Consent of Independent Accountants




We hereby consent to the incorporation by reference in the Registration 
Statements on Form S-8 (Nos. 33-16428, 33-16463, 33-33338, 33-36836, 33-39315,
33-39657, 33-40941, 33-40942, 33-63972, 33-63974, 33-59147, 33-59611, 333-53571
and 333-53573) of Sequent Computer Systems, Inc. of our report dated January 28,
1999 appearing in the Annual Report to Shareholders which is incorporated in 
this Annual Report on Form 10-K.  We also consent to the incorporation by 
reference of our report on the Financial Statement Schedule.





PRICEWATERHOUSECOOPERS LLP


Portland, Oregon
March 12, 1999