Sequent Computer Systems Inc/OR · 10-K · For 12/28/96

Filed On 3/26/97   ·   SEC File 0-15627   ·   Accession Number 811716-97-2

Annual Report   ·   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         51±   241K 
 2: EX-10       Material Contract                                      4±    23K 
 3: EX-10.1     Material Contract                                      9±    48K 
 4: EX-10.2     Material Contract                                      6±    35K 
 5: EX-10.3     Material Contract                                      5±    25K 
 6: EX-10.4     Material Contract                                     24±   118K 
 7: EX-27       Financial Data Schedule                                1      6K 

10-K   ·   Annual Report
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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 December 28, 1996 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              
(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 February 28, 1997, based on the closing price on such date on     
the NASDAQ National Market System:  $592,694,320.                               

Number of shares of Common Stock outstanding as of February 28, 1997: 
34,765,481.                                                                     

 Documents Incorporated by Reference
                                      Part of Form 10-K into
  Document                            which incorporated
1996 Annual Report to Shareholders              Parts II and IV           
Proxy Statement for 1997 Annual                                       
Meeting of Shareholders                       Part III          

TABLE OF CONTENTS           

Item of Form 10-K                                                  Page         

PART I                                                                          

Item 1.    Business                                               3       

Item 2.    Properties                                            11       

Item 3.    Legal Proceedings                                     11       

Item 4.    Submission of Matters to a Vote of Security Holders   11       

Item 4(a). Executive Officers of the Registrant                  11       

PART II                                                                         

Item 5.    Market for the Registrant's Common Equity and         13       
Related Stockholder Matters                         

Item 6.    Selected Financial Data                               13       

Item 7.    Management's Discussion and Analysis of Financial     13       
Condition and Results of Operations                 

Item 8.    Financial Statements and Supplementary Data           13       

Item 9.    Changes in and Disagreements with Accountants         13       
on Accounting and Financial Disclosure              

PART III                                                                        

Item 10    Directors and Executive Officers of the Registrant    14       

Item 11    Executive Compensation                                14       

Item 12    Security Ownership of Certain Beneficial Owners and   14       
Management                                          

Item 13    Certain Relationships and Related Transactions        14       

PART IV                                                                         

Item 14.   Exhibits, Financial Statement Schedules and Reports   15       
on Form 8-K                                         

SIGNATURES                                                          23          

PART I          

Item 1.     Business.                                                           

   Sequent Computer Systems, Inc. ("Sequent" or "the Company") is a provider
of scalable data center ready open systems solutions for large organizations    
spanning diverse industries.  Sequent designs, manufactures and markets high-   
performance symmetric multiprocessing (SMP) and CC-NUMA (Cache Coherent Non-    
Uniform Memory Access) computer systems and operating environment software.     
The Company's systems are widely used for large-scale on-line transaction       
processing (OLTP), applications in decision support systems (DSS) and data      
warehouses, for custom applications built upon relational database management   
systems (RDBMS), and as the central server in client-server architectures.      
Sequent's project-oriented offerings include a comprehensive portfolio of       
customer, professional and education services to solve complex Information      
Technology (IT) problems.  The Company has an established set of partnerships   
with other software, hardware and services providers to deliver complete        
solutions to its customers.                                                     

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                                                                 

 In the past decade, Sequent has developed the experience to guide large
organizations through complex changes faced in moving to open systems.  These   
changes include the renovation of business processes aligned with new           
information systems, maximizing benefits of SMP architectures and open          
systems, widespread use of relational database management system (RDBMS)        
applications and the substitution of OLTP for traditional batch processing.     
Since the launch of its SMP family of systems in 1984, Sequent has installed    
more than 8,000 SMP open systems worldwide.                                     

   Information Systems Renovation.  Global economies and intense competitive
pressures today prompt many companies to provide employees with access to data  
in order to increase responsiveness to customer needs.  This need for access    
to data requires companies to re-engineer or redesign their business processes  
to take advantage of innovative open client/server architectures, systems and   
products.  Sequent offers a focused collection of IT infrastructure             
consulting, education and implementation services.  These services are geared   
to assess an organization's current systems, work with the customer's IT staff  
or their chosen systems integrator to design new systems that support business  
objectives, and to deliver and implement systems with a complete IT solution.   

SMP Architectures. With dramatic improvement in the power and         
price/performance characteristics of processors and the proven ability of SMP   
architectures to incorporate multiple processors into a single large-scale      
system or group of systems, customers are increasingly employing SMP systems    
to meet their commercial computing needs.  Sequent has thirteen years of        
success with SMP systems.  The adoption of SMP architectures by other major     
computer systems providers ensures continued acceptance of SMP in the           
commercial marketplace.                                                         

   NUMA-Q Architectures.  For nearly a decade, SMP systems have been able to
meet the demands for large-scale OLTP, DSS and business communications          
implementations.  However, the architecture of these systems can limit          
performance beyond a certain number of processors.  All of the processors in    
an SMP system are connected to each other and to memory and I/O by a single     
bus.  The bandwidth of the bus imposes limits on processing scalability, a      
significant penalty with the dramatically rising level of processor             
performance.  This limitation has prevented SMP nodes from increasing much      
beyond 32 processors.  As a result, Sequent realized that a new SMP             
architecture was required:  NUMA-Q.  NUMA-Q is the first CC-NUMA architecture   
for large-scale systems available to the commercial marketplace.  Sequent       
began shipment of NUMA-Q during the fourth quarter of 1996.                     

Open Systems.  Historically, large organizations have relied upon     
computing equipment based upon a single vendor's proprietary technology that    
was generally incompatible with that of other vendors.  In recent years,        
proprietary systems have become increasingly unacceptable to companies that     
want the flexibility to purchase computing equipment and software best suited   
for a specific need without being constrained by the technology employed by a   
specific vendor.  Proprietary systems also make it difficult for the PC user    
to access information and applications from the central computer.  An open      
system, by contrast, incorporates industry standard technology and permits      
users to integrate computer equipment and software offered by different         
vendors.  An open systems environment also facilitates offloading applications  
from the central computer to a less expensive department, desktop or special-   
purpose computer.  Many companies are replacing some or all of their            
proprietary central computing systems, moving to a more open, distributed       
system when they upgrade or expand their systems.                               

   RDBMS and OLTP.  RDBMS is the primary vehicle for managing information in
large organizations.  RDBMS systems are also used to support OLTP, which is     
increasingly replacing traditional batch processing of historical data in       
businesses with centralized information needs and distributed operations.  The  
OLTP market includes any systems that support the day-to-day operational        
processes of a corporation.  The market demand for OLTP computing systems,      
particularly those using RDBMS technology, spans a wide variety of industries   
and applications and has increased dramatically as more businesses require      
instantaneous processing of information.                                        

Rapid Growth in Desktop and Network Computing.   In recent years,     
companies have increasingly sought to improve the efficiency of their           
computing systems by integrating PCs with centralized computing resources to    
enable enterprise-wide communication, distributed processing and instantaneous  
access to enterprise information (database) and computing services              
(applications software).  Recently market introductions include "Thin Clients"  
or "Network Clients" which are lightweight desktop devices with little innate   
computing capability and no magnetic storage. The use of such devices as an     
alternative for PCs or ASCII terminals is expected to increase demand for       
larger back-end servers similar to those offered by Sequent.                    

Sequent's Strategy                                                              

  Sequent's strategy is to integrate the best technologies from across the
industry in order to deliver scalable data center ready open systems            
solutions, including a comprehensive portfolio of migration services and        
offerings.  With the Company's new NUMA-Q architecture and an established set   
of partnerships with industry-leading technology vendors, Sequent's systems     
enable implementation of complex business applications that support customers'  
critical needs.                                                                 

Migration to Open Systems.  Sequent concentrates on understanding the 
business objectives and IT needs of the customer at all organizational levels.  
The Company then works closely with the customer and suppliers of key           
technology components to design an open, integrated solution to meet the        
customer's computing needs.  The Company seeks to add value for the customer    
by teaming with them, or their designated systems integrator, to design an      
integrated system that directly supports the customer's business objectives     
and conforms to a sound architectural infrastructure including processing and   
data storage hardware, system software, applications and data center            
management services.  The Company focuses on large-scale organizations that     
have data center based information systems and are committed to migrating from  
a proprietary system environment to open systems.                               

 Leading-Edge Technologies.  Sequent's NUMA-Q systems, recognized as the
industry's leading large-scale CC-NUMA platforms for the commercial             
marketplace, provide exceptional price/performance and scalability for RDBMS,   
core business and client/server applications.  The performance benefits of      
NUMA-based architectures, compared to standard SMP and single processor         
systems, are especially pronounced in transaction-intensive and decision        
support applications.  Sequent's NUMA-Q systems currently use Intel             
Pentium Pro processors and have been designed to incorporate up to 252          
processors in a single node. Sequent intends to maintain its leadership         
position in NUMA-Q systems, including upgrading to new Intel processor          
generations as they become available.                                           

   Commitment to Open Systems.  Sequent's open system architecture leverages
industry standards whenever possible, including the use of Intel processors,    
the UNIX and Windows NT operating systems, and standard network and             
communications interfaces. Sequent systems are designed to operate in a multi-  
vendor heterogeneous environment and support a wide variety of third-party      
software, including open RDBMSs, packaged applications, and decision support    
tools and applications.                                                         

   "Partnering" with Leading Vendors.  Sequent devotes substantial resources
to strategic marketing and product development relationships with those         
companies it believes offer the best open systems technologies.  Sequent has    
relationships with industry-leading systems management and tools vendors, such  
as Tivoli, Computer Associates, BMC and Hewlett Packard, in order to deliver a  
computing environment ready to run in customers' data centers.  The Company     
also has relationships with major providers of RDBMS software, including        
Oracle Corporation, Informix Software Inc., and Computer Associates.  Sequent   
also has strategic relationships with Intel for joint research and development  
of future computer hardware "building blocks"; with suppliers of other major    
operating systems, such as Microsoft for Windows NT; with major suppliers of    
communications and network software, including Novell; with emerging suppliers  
of client/server application development products such as Forte Software,       
Inc.; and with suppliers of third-party applications software such as Oracle,   
PeopleSoft, Baan and SAP.                                                       

Platform Overview                                                               

Business automation and systems integration applications require      
extensive amounts of computing power, memory and disk storage throughput.       
Sequent systems are designed for customers with extensive computing             
requirements.  Sequent products are based on industry standards and are         
designed to easily combine with other computing hardware in an open systems     
environment.  Sequent systems enable customers to implement cost-effective      
computing, to automate business functions and to integrate enterprise-wide      
computing operations.                                                           

The Company's Symmetry systems, which start at two processors, are    
currently based on Intel Pentium processors and offer high levels of            
transaction processing and decision support performance.  The Company's NUMA-Q  
systems, which start at four processors and are based on Intel Pentium Pro      
processors, have shown performance and scalability capabilities expanded        
beyond the limitations of current single-bus SMP architecture.                  

Sequent's processor-independent architecture allows the Company to    
incorporate technological advances in its product offerings more quickly and    
inexpensively than manufacturers of computer systems with proprietary central   
processing units.  The Company's ongoing product development efforts leverage   
advances in open systems technology, including processor enhancements, storage  
technology, communications and user-interface enhancements.  These              
enhancements directly benefit customers who can upgrade their installed         
Sequent systems without altering source programs, retraining users or           
replacing hardware and software not directly affected by the upgrade.  The new  
NUMA-Q systems  (NUMA-Q 2000) are binary compatible with Sequent's previous     
generation of systems, the Symmetry 5000.  Future processors will be offered    
for the NUMA-Q systems and will be binary compatible and function in the same   
systems as the current generation of processors.                                

Sequent's Symmetry and NUMA-Q systems are based on an open system     
architecture that incorporates industry standards such as those in the UNIX     
operating system.  DYNIX/ptx, Sequent's version of UNIX, enhanced for SMP in    
the commercial marketplace, allows Sequent systems to provide nearly linear     
improvements in incremental performance as processors are added. DYNIX/ptx      
provides Sequent customers access to a growing array of UNIX software           
applications.  Sequent Symmetry and NUMA-Q systems used in network and          
client/server applications link PCs and department level and central computers  
to deliver applications and information to desktop PCs through network and PC   
interfaces, allowing users access to extensive processing power and             
information.                                                                    

The Company's low-end and mid-range NT systems, which run Microsoft   
Windows NT operating system, are based on Intel Pentium processors. The         
Windows NT-based systems provide database and application services for          
workgroup, departmental and enterprise-level computing requirements.            

Operating Systems.  The Company is committed to support both the UNIX 
operating system and the emerging Windows NT system, which the Company          
believes will be the two major operating systems for open, enterprise-wide      
computing.  The Company's continuing leadership in the development of UNIX-     
based SMP systems has been acknowledged by the industry's  leading developers   
of commercial UNIX systems software.                                            

The Company continues to enhance the DYNIX/ptx operating system,      
currently as DYNIX/ptx 4.3 adding features to operate in mission critical       
environments.  The Company is currently developing DYNIX/ptx Version 4.4,       
which will be available in the second quarter of 1997.  These features include  
increased scalability and improved systems management and will support highly   
available systems and clusters.                                                 

The Company has had ongoing technical discussions with Microsoft and  
other partners to extend the scalability, reliability and manageability of the  
Windows NT operating system and applications.                                   

Partnering with Leading Vendors                                                 

   Relational Database Management Software.  Sequent has strategic marketing
and development relationships with major independent providers of RDBMS         
software, including Oracle Corporation, Informix Software, Inc. and Computer    
Associates. Sequent's SMP architecture is designed to maximize the performance  
and scalability requirements for managing extensive amounts of computing power  
required by OLTP applications in conjunction with RDBMS software. In addition,  
this same technology, coupled with the emerging capabilities provided by        
Sequent's RDBMS partners, strengthens the decision support performance          
required by large-scale enterprises today.  Sequent has chosen to run its       
partners' software in support of its own enterprise needs. Sequent and these    
strategic partners join forces in joint development programs, joint marketing   
programs, and sales teaming efforts. The result is an exchange of technical     
personnel, dedicated marketing expertise and a highly trained sales             
organization to help sell the Company's and its partners' combined solutions.   

Client/Server Application Software.  Sequent maintains strategic      
relationships with key software providers to assure the availability and        
maximum performance of pivotal software products on the Sequent platform.       
Sequent offers packaged and custom applications.                                

   Packaged Applications:  Packaged software applications provide a standard
pre-engineered solution for a common set of functional business problems.       
Packaged 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 a number of strategic relationships with       
software partners who provide products in this area including Oracle,           
PeopleSoft, Baan and SAP.                                                       

   Custom Software Applications:  Custom software applications are developed
using a variety of tools provided by software partners.  The applications are   
used in building custom solutions in situations where packaged applications do  
not meet business requirements or where customers desire to build systems for   
a competitive edge.  Sequent maintains a number of strategic relationships      
with software partners who provide products in this area including Oracle,      
Informix and Forte.                                                             

Communications Products.  The Company's systems support communications
products which allow Symmetry and NUMA-Q systems to interconnect in a           
multivendor systems environment.  These products include hardware which         
connect to wide and local area networks of different media and software which   
supports protocols for open and proprietary systems.                            

Sequent's communications products are differentiated by Parallel      
STREAMS Architecture which utilizes SMP architecture to produce high            
performance and scalable communications.  Parallel STREAMS are used for both    
low level communications media software to drive Ethernet, Token Ring, fiber    
distributed data interface ("FDDI") and synchronous lines as well as high       
level protocols.                                                                

In addition to open systems communications using protocols such as    
TCP/IP, Open Systems Interconnections ("OSI") and X.25, Sequent communicates    
directly with IBM and DEC systems via Systems Network Architecture ("SNA") or   
DECnet/LAT protocols, respectively.  The Company interfaces with many other     
vendors utilizing these same protocols.                                         

   Sequent offers several high speed communications connections on the NUMA-
Q systems.  These include 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.                   

Third-Party Applications Programs.  The rapidly expanding universe of 
applications software can be easily ported to Sequent's UNIX-based Symmetry     
and NUMA-Q multiprocessing systems.  The Company recognizes that applications   
software is a critical element in providing solutions to the enterprise and     
maintains marketing programs to promote the development and support of third-   
party applications software packages for the Company's systems.  Currently,     
over 650 software application modules from approximately 300 vendors are        
available to Sequent users.  The software products offered drive core business  
applications in transaction-intensive, decision support, database technologies  
and development environments.  The software packages available address the      
needs of many different vertical markets, including manufacturing,              
telecommunications, health care, financial services and state and local         
governments.  To supplement the marketing efforts of the third-party            
suppliers, the Company actively promotes these software partners to end users   
through joint sales campaigns, demonstrations at its sales offices and trade    
shows, marketing collateral, and joint marketing programs.                      

In addition, Sequent's NT systems support the thousands of software   
applications developed by third-party companies for the Microsoft Windows NT    
operating system.                                                               

Sales and Distribution                                                          

  The Company sells its products and services through worldwide direct and
indirect distribution channels.  The primary sales channel in North America     
and Europe is through the direct sales force, increasingly in partnership with  
major systems integrators, while sales channels in Asia and the rest of the     
world are primarily through distributors.  The Company has 59 sales offices     
worldwide, including 33 in North America and 14 in Europe.  Indirect sales      
channels utilized by the Company include value-added resellers, original        
equipment manufacturers ("OEMs"), and foreign distributors.                     

   As is common in the computer industry, a significant portion of orders is
generally received and shipped in the last month of a fiscal quarter.  As a     
result, the Company's product backlog is relatively small, is not necessarily   
indicative of sales levels for future periods and is not material to            
understanding the Company's business.                                           

 The Company had no single customer that represented greater than 10% of
total revenues in 1996, 1995 or 1994.  International sales were approximately   
55% of the Company's total revenues in 1996 and 1995 and 48% in 1994.           

Competition                                                                     

   The computer industry is intensely competitive and characterized by rapid
technological advances resulting in frequent new product introductions and      
improvements in performance.  Competitive factors include product quality and   
reliability, professional services capability, architectural fit, relative      
price/performance, ease of understanding and operation of the system,           
capability of the operating system software, availability of applications       
software, marketing capability, service and support, name recognition, and      
corporate reputation and longevity.                                             

Within the commercial segment of the general purpose computing market,
Sequent competes against, among others, the major computer manufacturers        
including Hewlett-Packard, DEC, IBM and SUN.  The size, reputation, installed   
base and distribution strength of these companies make them significant         
competitors.  Sequent's Professional Services organization is closely aligned   
to its systems business.  Accordingly, it competes against the professional     
services organizations of its rival computer manufacturers, including, among    
others, SUN, Hewlett-Packard, DEC and IBM.  Sequent's Professional Services     
organization also competes to a lesser degree with small, localized consulting  
firms who offer tactical help in the areas of systems administration, database  
design and administration and other design services.  Although some of these    
competitors have financial, marketing, distribution and technical resources     
which significantly exceed those of the Company, the Company believes that it   
can compete favorably in the open systems marketplace based on its              
technological advancements, professional services expertise, price/performance  
and value to the customer.                                                      

Product Development                                                             

 The Company's research and development programs are continually focused
on advancing hardware and software technologies.  Sequent not only leverages    
the availability of processor technology from Intel, but also leverages         
systems management and backup/restore software products supplied by open        
systems vendors. Sequent adds high-end capabilities to these products to        
better satisfy customer needs.                                                  

   In December of 1996, Sequent successfully introduced systems based on its
new Cache Coherent Non-Uniform Memory Access (CC-NUMA) architecture.            
Sequent's CC-NUMA architecture (NUMA-Q) condenses four Intel Pentium Pro        
processors, memory and input/output ports into a single building block for      
increased performance and reliability.  These four-processor "quads"            
interconnect with the Company's IQ-Link technology which allows a large         
number of quads to become a distributed shared memory SMP system.  As with      
previous designs, the performance will scale nearly linearly as quads are       
added to a system. Sequent's NUMA-Q systems are expected to be both software    
compatible and clustered systems compatible with Sequent's existing Symmetry    
product line in the second quarter of 1997.  Sequent will continue to enhance   
the NUMA-Q product line to best meet market needs.                              

The Company's software development program is focused on improving the
performance of its parallel-enabled operating system, providing highly          
available clustering software, and enhancing its suite of communications,       
network and client/server and third-party applications software.  The Company   
intends to continue making substantial investments in research and development  
activities to maintain and enhance its competitive position in a market         
characterized by rapid technological advances.                                  

Professional Services and Product Support                                       

       Sequent offers a wide range of professional services to ensure that
every phase of a customer's project, from advance planning and architecture to  
technology deployment and ongoing systems support, is successful.               
Professional services include:  IT architecture and transition planning; DSS    
design and implementation; packaged OLTP installation and implementation (such  
as Oracle Financials & Manufacturing, SAP, Baan, and PeopleSoft applications);  
and enterprise management design and systems administration.   The Company's    
Professional Services group uses leading edge knowledge to deliver enterprise-  
wide system solutions designed to meet customers' business requirements.  In    
addition, Sequent offers customers a comprehensive set of education and         
training programs.                                                              

Sequent's Professional Services business is positioned to support     
traditional management consultants that perform business process analysis and   
re-engineering, such as Nola, Norton & Co., and McKinsey & Co., with Sequent's  
technical system integration skills.  The Company also teams with major         
systems integration companies and "Big 6" consulting firms such as  Electronic  
Data Systems Corp., Ernst & Young, and KPMG when developing IT solutions for    
large and complex system projects.  Both management consultants and technical   
system integration consultants are strategic components of the Company's        
success in delivery of services to its customers.                               

The Company also offers an array of customer service and support      
programs, including hardware maintenance and service, software service and      
upgrades and documentation support.  In addition, hardware maintenance is       
offered for many third-party peripheral products connected to the Sequent       
system.  The Company maintains a 24-hour toll-free telephone line for           
technical consultation as well as remote log-in capability for diagnosing       
customer hardware and software problems.  In some cases,  in-field hardware     
service is contracted to third-party suppliers, which rely on Sequent for       
customer interface and diagnostic support.  The Company's standard warranty on  
its products generally extends 90 days from the date of customer installation.  

The Company believes that the quality and reliability of its computer 
systems are important to customer satisfaction.  Sequent's systems have proven  
their high quality and reliability.  High system uptime is a built-in           
advantage of Sequent's architecture.  Sequent personnel perform all             
installations and hardware fault isolation and provide complete software        
support for direct customers.  Sequent systems are equipped with diagnostic     
tools that allow the Company's service engineers to identify, diagnose and      
repair a failed component from remote locations.  Replacement modules can be    
provided quickly to restore the system to full capacity.  The Company also      
offers service and support programs in system performance evaluation and        
disaster protection.                                                            

   Revenue generated from services and support was 30%, 27% and 24% of total
revenue during 1996, 1995 and 1994, respectively.                               

Manufacturing                                                                   

  The Company's manufacturing operations consist of procurement, assembly,
test and quality control.  Subcontractors are often used to assemble and test   
subassemblies, such as printed circuit boards.  The modular nature of the       
Company's products, together with the standards-based open architecture,        
permit ease of manufacture and system configuration.  Once integrated, all      
systems go through a fully operational, continuous burn-in cycle while          
executing rigorous system stress and diagnostic tests.  Final assembly and      
testing occur only when a specific customer order is due for shipment (because  
of the broad range of system configurations possible from a relatively few      
basic modules and the many choices of peripherals).  If a failure occurs or a   
problem of unknown origin arises during work-in-progress testing, it is the     
policy of the Company to halt shipment of products which may be affected while  
the Company isolates and corrects the problem and determines whether the        
problem may extend to other systems in manufacturing or at customer sites.      
Such interruptions could cause fluctuations in quarterly results.               

  The Company generally obtains most parts and components from one vendor,
even where multiple sources are available, to maintain quality control and      
enhance the working relationship with suppliers.  These relationships include   
joint engineering programs for new product development.  The Company attempts   
to reduce the risk of supply interruption through close supplier relationships  
and greater inventory positions in certain sole-sourced components.  The        
failure of a supplier to deliver on schedule could delay or interrupt the       
Company's delivery of products and thereby adversely affect the Company's       
revenue and profits.                                                            

Patents and Licenses                                                            

Four U.S. and three United Kingdom patents have been issued to the    
Company.  The Company has filed ten additional U.S. patent applications and     
two foreign applications covering technology incorporated into its products,    
which are still pending.  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 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 December 28, 1996 the Company employed approximately 2,656 employees
of whom approximately 268 were employed as sales executives, 1,459 in sales     
support, marketing and service, 466 in product development, 159 in              
manufacturing and 304 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 is represented by a labor union.     
All full-time Sequent employees are granted options to acquire Common Stock of  
the Company.  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, Symmetry, WinServer and DYNIX/ptx are registered trademarks  
and Parallel STREAMS, NUMA-Q and IQ-Link are trademarks of Sequent              
Computer Systems, Inc.  This Report on Form 10-K also refers to trademarks      
held by other corporations.                                                     

Forward-Looking Statements                                                      

Information in this Report on Form 10-K that is not historical        
information, including information regarding product development schedules,     
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:  timely completion of product development and customer acceptance   
of the Company's NUMA-Q product line; business conditions and growth in the     
electronics industry and general economies, both domestic and international;    
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 availability of   
third party parts and supplies at reasonable prices; changes in product mix     
and the mix between product and service revenue; significant quarterly          
performance fluctuations due to the receipt of a significant portion of         
customer orders and product shipments in the last month of each quarter; and    
product shipment interruptions due to manufacturing problems.  Any forward-     
looking statements should be considered in light of these factors.              

Item 2.   Properties.                                                           

  The Company's headquarters and its product development and manufacturing
operations are located in facilities totaling approximately 560,000 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 38.12 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.                                                  

Not applicable.                                                       

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

There are no material pending legal proceedings involving the Company.

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

Name                  Age   Position                                            

Karl C. Powell, Jr.    53   Chairman and Chief Executive Officer, Director      
John McAdam            46   President and Chief Operating Officer, Director     
Robert S. Gregg        43   Sr. Vice President of Finance and Legal             
       and Chief Financial Officer
Steve Chen             53   Executive Vice President of Product Group and       
              Chief Technology Officer, Director
Andre Dahan            48   Sr. Vice President of World Wide Field Operations   
and Marketing       

  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 &   
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.                                                       

Dr. Chen joined the Company in 1996 as its Executive Vice President of
Product Group and Chief Technology Officer and as a member of the Board of      
Directors.  Prior to joining the Company, Dr. Chen was a co-founder of          
SuperComputer International (SCI), later renamed Chen Systems, which was        
recently acquired by Sequent.  Prior to founding SCI, Dr. Chen was President    
and CEO of Supercomputer Systems, Inc. (SSI).  Previous to this, Dr. Chen was   
employed for eight years at Cray Research, Inc., serving most recently as       
Senior Vice President.  Dr. Chen holds a  Ph.D. in computing science from the   
University of Illinois, a M.S. degree in electrical engineering from Villanova  
University and a B.S. degree in electrical engineering from the National        
Taiwan University.                                                              

  Mr. Dahan joined the Company in 1996 as its Vice President of World Wide
Marketing and was then promoted to Senior Vice President of World Wide Field    
Operations.  Prior to joining the Company, Mr. Dahan was employed as the Vice   
President of Marketing of AT&T's Global Information Solutions division.  Mr.    
Dahan holds a B.S. degree in computer science from Jerusalem Institute of       
Technology.                                                                     

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 1996 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 1996 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 1996 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 1996 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 1996 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 1997 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", "Repricing of Stock Options" under
"Executive Compensation," and "Certain Transactions" in the 
Company's Proxy Statement for its 1997 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 1997 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 1997 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 1996
Annual Report to Shareholders:                              

Sequent Computer Systems, Inc. and Subsidiaries:                                

Consolidated Statements of Operations - Fiscal Years Ended December 28, 1996,   
December 30, 1995 and December 31, 1994                                   

Consolidated Balance Sheets - December 28, 1996 and December 30, 1995           

Consolidated Statements of Shareholders' Equity - Fiscal Years Ended December   
28, 1996, December 30, 1995 and December 31, 1994                         

Consolidated Statements of Cash Flows  - Fiscal Years Ended December 28, 1996,  
December 30, 1995 and December 31, 1994                                   

Notes to Consolidated Financial Statements                                      

Report of Independent Accountants                                               

(a)(2)    Financial Statement Schedules.                                        

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

                                                         Page in this report
                                                          on Form 10-K

Schedule V     Property and Equipment                                F-1        

Schedule VI    Accumulated Depreciation and Amortization                        
         of Property and Equipment                           F-2

Schedule VIII  Valuation and Qualifying Accounts                     F-3        

Schedule IX    Short-term Borrowings                                 F-4        

Schedule X     Supplementary Income Statement Information            F-5        

Report of Independent Accountants on Financial Statement Schedules   F-6        

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     Note Purchase Agreement dated April 10, 1992 regarding            
7.5% Convertible Subordinated Notes due March 31, 2000,   
between the Company and a group of institutional          
investors.  (Incorporated by reference to Exhibit 19 to   
the Company's Quarterly Report on Form 10-Q for the       
quarter ended March 28, 1992).                            

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     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).)                 

10.1H     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).)       

10.1I     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).)                                                

10.1J     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).)  

10.1K     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).)         

10.1L     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).)            

10.1M     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).)            

10.1N     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).)                                                

10.1O     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).)              

10.1P     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).)         

10.1Q     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).)            

10.1R     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).)                                                

10.1S     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).)              

10.1T     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).)              

10.1U     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).)              

10.1V     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).)                               

10.1W     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).)            

10.1X     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).)       

10.1Y     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).)            

10.1Z     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).)       

10.1aa    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).)                                              

10.1bb     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).)            

10.1cc     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).)            

10.1dd     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).)                                              

10.1ee     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).)                                        

10.1ff     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).)       

10.1gg     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).)       

10.1hh     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).)       

10.1jj     Lease Agreement between KC Woodside and the Company,             
dated June 10, 1991 (S. 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).)                                  

10.1kk     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).)       

10.1ll     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).)            

10.1mm     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).)            

10.1nn     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).)            

10.1oo     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).)       

10.1pp     Lease Agreement between KC Woodside and the Company,             
 dated January 15, 1996 (Guadalupe), as amended March 1,
1996 and October 1, 1996.                             

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 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.                               

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                  
B&K Transportation, Inc., dated October 1, 1993, as     
amended November 1, 1993 and December 12, 1994.         
(Incorporated by reference to Exhibit 10.4 to the       
Company's Annual Report on Form 10-K for fiscal year    
ended December  31, 1994 (File no. 0-15627).)           

* 10.4A   Aircraft Lease Agreement between the Company and                  
CP Transportation, Inc., dated October 1, 1996.         

* 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).)                     

* 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. Restated Employee                  
Stock Purchase Plan. (Incorporated by reference to    
 Appendix A to the Company's Proxy Statement dated March
18, 1993).                                            

* 10.9     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).                 

10.10    Agreement between American International                       
Motorsports (AI Motorsports) and Sequent Computer     
Systems, Inc., dated January 30, 1996.                

* 10.11     DP Applications, Inc. 100% Convertible Note dated               
    August 20, 1996 in favor of Robert W. Wilmot and Mary J.
Wilmot, trustees of the RW & MJ Wilmot Living Trust,
  U/D/T dated April 18, 1995 (the "Wilmot Trust") and DP
    Applications, Inc. Warrant for the Purchase of Shares of
     Capital Stock dated August 20, 1996 in favor of Robert W.
     Wilmot and Mary J. Wilmot, trustees of the RW & MJ Wilmot
Living Trust U/D/T dated April 18, 1995.            

* 10.12     DP Applications, Inc. Restricted Stock Purchase                 
Agreement dated December 2, 1996.                   

11        Statement regarding computation of earnings per share.        

13        1996 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 1996.                        

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 25, 1997              By: /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 27, 1996.                   

Signature                               Title                   

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

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

/s/ Steve Chen                 Director                                   
(Steve Chen)                                                              

/s/ John McAdam                Director                                   
(John McAdam)                                                             

DAVID R. HATHAWAY        *                                                
(David R. Hathaway)            Director                                   

ROBERT C. MATHIS         *                                                
(Robert C. Mathis)             Director                                   

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

RICHARD C. PALERMO       *                                                
(Richard C. Palermo)           Director                                   

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

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

                                                        · Enlarge/Download Table
                                                                                   SCHEDULE V     

                          SEQUENT COMPUTER SYSTEMS, INC.  AND SUBSIDIARIES                        
                                    PROPERTY AND EQUIPMENT (1)                                    
                                         (In thousands)                                           



                            Balance at                                              Balance at    
                           Beginning of   Additions                 Other Charges     End of      
                              Period       at Cost    Retirements   Add (Deducts)     Period      
                                                                                                  
Year ended Dec. 31, 1994                                                                          
  Land                      $   5,037     $      0     $      0        $  0         $   5,037     
  Operational equipment        95,895       38,053       14,413           0           119,535     
  Furniture and equipment      46,643       14,875        7,646           0            53,872     
  Leasehold improvements       11,193        1,707          559           0            12,341     
                            $ 158,768     $ 54,635     $ 22,618        $  0         $ 190,785     

Year ended Dec. 30, 1995                                                                          
  Land                      $   5,037     $      0     $      0        $  0         $   5,037     
  Operational equipment       119,535       25,162        9,800           0           134,897     
  Furniture and equipment      53,872       14,499        1,361           0            67,010     
  Leasehold improvements       12,341        3,711           78           0            15,974     
                            $ 190,785     $ 43,372     $ 11,239        $  0         $ 222,918     

Year ended Dec. 28, 1996                                                                          
  Land                      $   5,037     $      0     $      0        $  0         $   5,037     
  Operational equipment       134,897       59,356       19,591           0           174,662     
  Furniture and equipment      67,010       29,375        6,434           0            89,951     
  Leasehold improvements       15,974        6,728          118           0            22,584     
                            $ 222,918     $ 95,459     $ 26,143        $  0         $ 292,234     

(1)  Depreciation and amortization is provided on a straight-line basis                           
     over the estimated life as follows:                                                          

     Operational equipment     3 to 5 years                                                       
     Furniture and equipment   3 to 5 years                                                       
     Leasehold improvements    5 to 10 years                                                      

                                                                                     SCHEDULE VI  

                         SEQUENT COMPUTER SYSTEMS, INC.  AND SUBSIDIARIES                         
                            ACCUMULATED DEPRECIATION AND AMORTIZATION                             
                                    OF PROPERTY AND EQUIPMENT                                     
                                          (In thousands)                                          


                                           Additions                                              
                            Balance at     Charged to   Retirements       Other         Balance at
                            Beginning of   Costs and     Charged to      Charges          End of  
                               Period      Expenses     Other Accts.   Add (Deducts)      Period  
                                                                                                  
Year ended Dec. 31, 1994                                                                          
  Operational equipment      $  41,321     $ 19,370      $  5,060          $  0         $  55,631 
  Furniture and equipment       27,456       13,810         5,524             0            35,742 
  Leasehold improvements         3,682        1,613            97             0             5,198 
                             $  72,459     $ 34,793      $ 10,681          $  0         $  96,571 

Year ended Dec. 30, 1995                                                                          
  Operational equipment      $  55,631     $ 18,183      $  2,339          $  0         $  71,475 
  Furniture and equipment       35,742       12,490         2,389             0            45,843 
  Leasehold improvements         5,198        2,291            54             0             7,435 
                             $  96,571     $ 32,964      $  4,782          $  0         $ 124,753 

Year ended Dec. 28, 1996                                                                          
  Operational equipment      $  71,475     $ 21,246      $  8,839          $  0         $  83,882 
  Furniture and equipment       45,843       20,738         2,343             0            64,238 
  Leasehold improvements         7,435        2,959           118             0            10,276 
                             $ 124,753     $ 44,943      $ 11,300          $  0         $ 158,396 

                                                                                SCHEDULE VIII     

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


                                         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        
                                                                                                  
Year ended Dec. 31, 1994                                                                          
  Allowance for doubtful                                                                          
    accounts                $  1,781     $    898       $     9       $    355     $  2,333       
  Accumulated amortization                                                                        
    capitalized software    $ 28,912     $ 12,778       $     0       $      0     $ 41,690       

Year ended Dec. 30, 1995                                                                          
  Allowance for doubtful                                                                          
    accounts                $  2,333     $  1,089       $   (18)      $    588     $  2,816       
  Accumulated amortization                                                                        
    capitalized software    $ 41,690     $ 16,618       $     0       $      0     $ 58,308       

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       

(1) Foreign currency translation adjustment                                                       

                                                                              SCHEDULE IX         

                         SEQUENT COMPUTER SYSTEMS, INC.  AND SUBSIDIARIES                         
                                     SHORT-TERM BORROWINGS                                        
                                        (In thousands)                                            


                                                  Maximum      Average       Weighted             
                                      Weighted     Amount       Amount       Average              
                          Balance at   Average   Outstanding  Outstanding  Interest Rate          
                            End of    Interest   During the   During the    During the            
                            Period      Rate       Period       Period      Period (1)            
                                                                                                  
Year ended Dec. 31, 1994                                                                          
  Notes payable to bank    $ 59,437     5.5%      $ 59,437     $ 44,772       5.6%                

Year ended Dec. 30, 1995                                                                          
  Notes payable to bank    $ 41,146     5.5%      $ 61,529     $ 47,155       6.3%                

Year ended Dec. 28, 1996                                                                          
  Notes payable to bank    $ 59,925     5.6%      $ 78,725     $ 36,781       5.2%                

(1) The weighted average interest rate during the period is calculated                            
    using monthly weighted averages.                                                              

                                                                           SCHEDULE X             

              SEQUENT COMPUTER SYSTEMS, INC.  AND SUBSIDIARIES                                    
                 SUPPLEMENTARY INCOME STATEMENT INFORMATION                                       
                               (In thousands)                                                     


                                                 Fiscal Year Ended                                
                                       Dec. 28,       Dec. 30,       Dec. 31,                     
                                          1996           1995           1994                      
                                                                                                  
Depreciation and amortization:                                                                    
  Depreciation                         $ 44,943       $ 34,972       $ 31,822                     
  Capitalized software amortization      19,984         16,618         12,778                     
  Goodwill amortization                     607            504            536                     
      Total                            $ 65,534       $ 52,094       $ 45,136                     

Royalties                              $ 12,139       $ 10,141          6,374                     

Advertising                            $ 16,674       $ 11,358       $ 11,674                     


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 23, 1997 appearing in the 1996 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 Schedules listed in Item      
14(a)(2) of this Form 10-K.  In our opinion, these Financial Statement          
Schedules present fairly, in all material respects, the information set forth   
therein when read in conjunction with the related consolidated financial        
statements.                                                                     

PRICE WATERHOUSE LLP                                                            

Portland, Oregon                                                                
January 23, 1997                                                                

                                                        EXHIBIT 11

SEQUENT COMPUTER SYSTEMS, INC.  AND SUBSIDIARIES      
STATEMENT SHOWING CALCULATION OF AVERAGE      
COMMON SHARES OUTSTANDING AND EARNINGS      
PER AVERAGE COMMON SHARE      
(In thousands, except per share amounts)      

                          Three Months Ended        Year Ended
                               December 28, 1996     December 28, 1996

Weighted average number                                                         
of common shares outstanding            34,026                33,641        

Application of the "treasury stock"                                             
method to the stock option and                                              
employee stock purchase plans (A)        2,309                   834        

Weighted average of common stock                                                
equivalent shares attributable to                                           
convertible debentures                     575                   575        

Total common and common                                                     
equivalent shares, assuming                                             
full dilution                         36,910                35,050      

Net income                             $   2,512             $   7,771          

Add:                                                                            
Interest on convertible debentures,                                         
net of applicable income taxes             125                   500        

Net income, assuming full dilution     $   2,637             $   8,271          

Net income per common share,                                                    
assuming full dilution (B)           $     .07             $     .23        

(A) Effective with the third quarter of 1996, the Company applied the           
"Modified Treasury Stock" method to calculate outstanding shares for    
stock options in accordance with APB 15.                                

(B) In accordance with generally accepted accounting principles, fully-         
diluted earnings per share may not exceed primary earnings per share.   

The computation of primary net income per common share is not included as the   
computation can be clearly determined from the material contained in this       
report.                                                                         

                                                        · Enlarge/Download Table
                                                                              EXHIBIT 13             

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


                                                              Fiscal Year Ended                      
                                       Dec 28,      Dec. 30,      Dec. 31,       Jan. 1,     Jan. 2, 
                                         1996          1995          1994          1994        1993  
                                                                                                     
OPERATIONS DATA                                                                                      

Total revenue                         $ 595,362     $ 540,345     $ 450,823     $ 353,806   $ 307,274
Income (loss) before income taxes     $  10,676     $  47,327     $  38,800     $  (6,331)  $  15,884
Net income (loss)                     $   7,771     $  35,073     $  33,134     $  (7,524)  $  14,433
Net income (loss) per share           $     .23     $    1.04     $    1.03     $    (.26)  $     .55
Average shares outstanding               34,254        33,665        32,028        29,335      26,120

BALANCE SHEET DATA                                                                                   

Working capital                       $ 183,428     $ 214,749     $ 168,468     $ 134,156   $  86,914
Total assets                          $ 612,009     $ 503,923     $ 435,977     $ 375,424   $ 278,759
Long-term obligations                 $  16,503     $   9,106     $  10,341     $  10,906   $  24,034
Shareholders' equity                  $ 374,809     $ 353,188     $ 291,195     $ 243,488   $ 172,502


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

OVERVIEW                                                                        

Total revenue was $595.4 million in 1996 compared to $540.3 million in
1995 and $450.8 million in 1994.  The Company recorded net income in 1996 of    
$7.8 million, compared to $35.1 million in 1995 and $33.1 million in 1994.      
The Company's total revenue for 1996 represents a 10% increase over 1995 and    
is attributed to significant increases in customer and professional service     
revenues in 1996 over 1995.  The Company's service revenue increased 25% in     
1996 over 1995 as a result of a growing number of customer installation bases   
and related service contracts, as well as an increase in the number of          
project-based sales.  The decrease in net income in 1996 compared to 1995 is    
the result of the heavy investment made in 1996 to bring the next-generation    
NUMA-Q product to market in December 1996 and expand the sales and              
professional services organizations to leverage the capability of the new       
technology.                                                                     

RESULTS OF OPERATIONS                                                           

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

                               Fiscal Year Ended
                                  December 28,  December 30,  December 31,
                                1996          1995          1994
Revenue:                                                                        
End-user products                     68.5%         69.4%        70.6%      
OEM products                           1.1           3.9          5.1       
Service                               30.4          26.7         24.3       
Total revenue                      100.0         100.0        100.0     
Cost of products and service            56.7          54.8         53.7         
Gross profit                            43.3          45.2         46.3         
Operating expenses:                                                             
Research and development               9.0           7.5          7.8       
Selling, general and administrative   32.1          28.7         29.7       
Total operating expenses            41.1          36.2         37.5     
Operating income                         2.2           9.0          8.8         
Interest income (expense), net           0.0           0.2         (0.3)        
Other income (expense), net             (0.4)         (0.4)         0.1         
Income before provision                                                         
for income taxes                       1.8           8.8          8.6       
Provision for income taxes               0.5           2.3          1.3         
Net income                               1.3%          6.5%         7.3         

REVENUE                                                                         

End-user product revenue increased $32.8 million, or 9%, from 1995 to 
1996 and $56.7 million, or 18%, from 1994 to 1995.  These increases have been   
primarily in the Company's North American and Asia Pacific geographies.  The    
revenue growth rate from 1995 to 1996 was impacted by the Company's product     
transition from its Symmetry line to its next-generation NUMA-Q systems,        
especially in the second half of 1996.  Despite the ongoing demand for          
Symmetry systems which are binary compatible with the NUMA-Q technology, the    
awareness of the pending release of the new product adversely affected          
Symmetry sales during 1996.  Volume shipments of NUMA-Q began late in the       
fourth quarter of 1996.                                                         

 As anticipated, total OEM revenue continued to decline in 1996 compared
to 1995 and 1994 due to decreases in revenue from Unisys Corporation.  Total    
OEM revenue in 1996 and 1995 was $6.5 million and $20.9 million, respectively,  
compared to $23.1 million in 1994.                                              

During 1996 and 1995, the Company's customer and professional service 
revenue continued to increase in dollar amount and as a percentage of total     
revenue primarily due to the growth in customer installation bases and          
associated customer service/maintenance contracts, as well as a focus on        
selling more solutions.                                                         

 The Company has continued to benefit from its significant investment in
developing worldwide sales and distribution channels.  International revenue    
as a percentage of total revenue was 55% in 1996 and 1995, increasing from 48%  
in 1994.  The majority of the international revenue is from Europe              
(particularly the United Kingdom), with the balance coming from Asia-Pacific    
and Canada.                                                                     

COST OF SALES                                                                   
                                   Fiscal Year Ended
                                    December 28,  December 30,  December 31,
                                    1996          1995          1994

Cost of products sold as a percentage                                           
of product revenue                       48%           48%           48%    
Cost of service as a percentage                                                 
of service revenue                       77            75            71     
Total cost of sales as a percentage                                             
of total revenue                         57            55            54     

The factors influencing gross margins in a given period include unit  
volumes (which affect economies of scale), product configuration mix, changes   
in component and manufacturing costs, product pricing and the mix between       
product and service revenue.                                                    

Total cost of sales as a percentage of total revenue increased both in
1996 and 1995 primarily due to lower margin service increasing as a percentage  
of total revenue.  As planned, the Company invested in expanding its            
professional service organization which has contributed to the overall          
increase of cost of service as a percentage of service revenue.  The Company    
increased headcount in its professional service organization by approximately   
38% in 1996.                                                                    

RESEARCH AND DEVELOPMENT                                                        

(dollars in millions)                          Fiscal Year Ended                
                                December 28,    December 30,    December 31,
                                1996            1995            1994

Research and development expense     $53.7           $40.9           $35.0      
As a percentage of total revenue       9%              8%              8%       

Software costs capitalized           $34.2           $23.4           $19.1      

 Research and development expense increased 31% in 1996 compared to 1995
and 17% in 1995 compared to 1994.  The Company continued to invest              
significantly in its new NUMA-Q architecture and software development, in       
addition to ongoing enhancements to existing products.  Consistent with         
management's plans, the NUMA-Q products began shipping in the Company's fourth  
quarter.  Research and development costs as a percentage of total revenue were  
approximately 9% in 1996, compared to 8% for 1995 and 1994.  Management         
intends to make significant investments during 1997 as it continues to enhance  
its NUMA-Q product line.                                                        

  Capitalized software amortization was approximately $20.0 million, $16.6
million, and $12.8 million in 1996, 1995 and 1994, respectively.  The Company   
has continued to increase its focus on software design for computing solutions  
and its next-generation products, resulting in greater investments in software  
development and products.                                                       

SELLING, GENERAL AND ADMINISTRATIVE                                             

(dollars in millions)                           Fiscal Year Ended               
                                  December 28,    December 30,    December 31,
                                  1996            1995            1994

Selling, general and administrative   $191.1          $155.0          $134.1    
As a percentage of total revenue        32%             29%             30%     

   The Company's selling, general and administrative costs increased both in
dollars and as a percentage of revenue in 1996, as the Company made             
significant investments in its worldwide sales force for successful delivery    
of NUMA-Q at the end of 1996.  During the year, the Company increased the       
number of sales teams by 54% worldwide.                                         

INTEREST AND OTHER, NET                                                         

(dollars in millions)                       Fiscal Year Ended                   
                          December 28,     December 30,     December 31,
                        1996             1995             1994

Interest income                  $3.0             $5.3             $3.5         
Interest expense                 $3.2             $4.2             $4.7         

Other income (expense), net     $(2.0)           $(2.3)            $0.5         

 Interest income is primarily generated from restricted deposits held at
foreign and domestic banks, short-term investments and cash and cash            
equivalents.  Interest expense includes costs related to convertible            
debentures, foreign currency hedging loans, interim short-term borrowings and   
capital lease obligations.                                                      

Other expense consists primarily of net gains and losses on sales of  
assets and discount on sale of receivables.                                     

INCOME TAXES                                                                    

The Company provided $2.9 million for income taxes in 1996 on a net   
profit before tax of $10.7 million.  The difference between the statutory rate  
and the effective tax rate is principally due to the benefit from the           
Company's Foreign Sales Corporation.  The 1996 effective tax rate of 27.2%      
compares to effective rates of 25.9% in 1995 and 14.6% in 1994.                 

LIQUIDITY AND CAPITAL RESOURCES                                                 

Working capital was $183.4 million at December 28, 1996 compared to   
$214.7 million at December 30, 1995.  The Company's current ratio at December   
28, 1996 and December 30, 1995 was 1.9:1 and 2.5:1, respectively.               

  Although net cash provided by operations for the year ended December 28,
1996 totaled $64.1 million, cash and cash equivalents decreased by $24          
million.  The Company continued to make significant investments in property     
and equipment ($80.6 million), inventory ($13.6 million) and capitalized        
software ($34.2 million), primarily related to product and software             
development associated with its new NUMA-Q product line.  Other investments     
included approximately $27 million in software licenses resulting from a long-  
term strategic partner alliance, of which approximately $15 million is          
included in prepaid royalties and other current assets.  Other sources of       
funds included net proceeds of stock issuances ($11 million), notes payable     
($18.8 million) and capital lease transactions ($14.7 million).                 

 The Company has a $20 million receivable sales facility with a group of
banks.  At December 28, 1996, accounts receivable in the accompanying           
consolidated balance sheet is net of $20 million received by the Company under  
this agreement to sell its domestic accounts receivable.                        

 The Company maintains a $70 million revolving line of credit agreement.
The line is unsecured and extends through May 30,1997.  The line contains       
certain financial covenants and prohibits the Company from paying dividends     
without the lenders' consent.  As of December 28, 1996, $12.2 million was       
outstanding 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 $57.2 million, of which $44.7 million was       
outstanding at December 28, 1996 (based on currency exchange rates on such      
date).                                                                          

The Company also maintains miscellaneous borrowing arrangements with a
foreign bank.  At December 28, 1996, amounts outstanding under this agreement   
totaled $870,000.                                                               

 In addition to the above, a subsidiary of the Company issued short-term
convertible notes during 1996 totaling $2.2 million, which were outstanding at  
December 28, 1996.                                                              

   Management expects that current funds, funds from operations and the bank
lines of credit will provide adequate resources to meet the Company's           
anticipated operational cash requirements during 1997.                          

FORWARD-LOOKING STATEMENTS                                                      

  The Chairman's Letter, Management's Discussion and Analysis of Financial
Condition and Results of Operations and other sections of this Annual Report    
contain information regarding growth expectations, market size, planned         
expenditure levels and comments relating to technology development and          
resulting release of future products.  These statements are 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:  timely completion of    
product development and customer acceptance of the Company's NUMA-Q product     
line; business conditions and growth in the electronics industry and general    
economies, both domestic and international; 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 availability of third party parts and supplies at      
reasonable prices; changes in product mix and the mix between product and       
service revenue; significant quarterly performance fluctuations due to the      
receipt of a significant portion of customer orders and product shipments in    
the last month of each quarter; and product shipment interruptions due to       
manufacturing problems.                                                         

                                                        · Enlarge/Download Table

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


                                                       Fiscal Year Ended                                         
                                              Dec. 28,      Dec. 30,      Dec. 31,                               
                                               1996          1995          1994                                  
                                                                                                                 
Revenue:                                                                                                         
  Product                                    $ 414,418     $ 395,941     $ 341,504                               
  Service                                      180,944       144,404       109,319                               
    Total revenue                              595,362       540,345       450,823                               

Costs and expenses:                                                                                              
  Cost of products sold                        197,702       188,232       164,991                               
  Cost of service revenue                      139,983       107,721        77,238                               
  Research and development                      53,733        40,923        35,047                               
  Selling, general and administrative          191,069       154,950       134,070                               
    Total costs and expenses                   582,487       491,826       411,346                               

Operating income                                12,875        48,519        39,477                               
Interest income                                  3,007         5,340         3,515                               
Interest expense                                (3,187)       (4,207)       (4,687)                              
Other income (expense), net                     (2,019)       (2,325)          495                               

Income before provision                                                                                          
  for income taxes                              10,676        47,327        38,800                               
Provision for income taxes                       2,905        12,254         5,666                               

Net income                                  $    7,771    $   35,073    $   33,134                               

Net income per share                        $     0.23    $     1.04    $     1.03                               

Weighted average number of common                                                                                
  and common equivalent shares outstanding      34,254        33,665        32,028                               

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)                                                   


                                                    Dec. 28, 1996   Dec. 30, 1995                                
                                                                                                                 
ASSETS                                                                                                           
Current assets:                                                                                                  
  Cash and cash equivalents                            $  37,979     $  61,939                                   
  Restricted deposits                                     44,655        39,642                                   
  Receivables, net                                       209,752       178,322                                   
  Inventories                                             74,491        60,853                                   
  Prepaid royalties and other                             30,577        13,464                                   
    Total current assets                                 397,454       354,220                                   
Property and equipment, net                              133,838        98,165                                   
Capitalized software costs, net                           59,567        45,381                                   
Other assets, net                                         21,150         6,157                                   
    Total assets                                       $ 612,009     $ 503,923                                   

LIABILITIES AND SHAREHOLDERS' EQUITY                                                                             
Current liabilities:                                                                                             
  Notes payable                                        $  59,925     $  41,146                                   
  Accounts payable and other                              88,119        60,095                                   
  Accrued payroll                                         24,853        11,723                                   
  Unearned revenue                                        30,787        21,466                                   
  Income taxes payable                                     3,017         4,981                                   
  Current obligations under capital leases and debt        7,325            60                                   
    Total current liabilities                            214,026       139,471                                   
Other accrued expenses                                     6,671         2,158                                   
Long-term obligations under capital leases and debt       16,503         9,106                                   
    Total liabilities                                    237,200       150,735                                   

Commitments and contingencies (Notes 6 and 12)                                                                   

Shareholders' equity:                                                                                            
  Common stock, $.01 par value, 100,000 shares                                                                   
    authorized, 34,188 and 33,221 shares outstanding         342           332                                   
  Paid-in capital                                        313,159       302,186                                   
  Retained earnings                                       60,715        52,945                                   
  Foreign currency translation adjustment                    593        (2,275)                                  
    Total shareholders' equity                           374,809       353,188                                   
    Total liabilities and shareholders' equity         $ 612,009     $ 503,923                                   

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)                                                    



                                                                           Retained       Foreign                
                                                                           earnings       currency               
                                         Common Stock        Paid-in     (accumulated    translation             
                                       Shares     Amount     capital        deficit)     adjustment      Total   
                                                                                                                 
Balance, January 1, 1994               30,245      $302      $265,910      $(15,262)      $(7,462)      $243,488 

Common shares issued                    1,115        12        12,235             -             -         12,247 
Net income                                  -         -             -        33,134             -         33,134 
Foreign currency translation                                                                                     
     adjustment                             -         -             -             -         2,326          2,326 
Balance, December 31, 1994             31,360       314       278,145        17,872        (5,136)       291,195 

Common shares issued                    1,798        18        18,298             -             -         18,316 
Tax benefit of option exercises             -         -         4,743             -             -          4,743 
Conversion of debentures                   63         -         1,000             -             -          1,000 
Net income                                  -         -             -        35,073             -         35,073 
Foreign currency translation                                                                                     
     adjustment                             -         -             -             -         2,861          2,861 
Balance, December 30, 1995             33,221       332       302,186        52,945        (2,275)       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 
Foreign currency translation                                                                                     
     adjustment                             -         -             -             -         2,868          2,868 
Rounding                                    -         -             -            (1)            -             (1)
Balance, December 28, 1996             34,188      $342      $313,159      $ 60,715        $  593       $374,809 

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)                                                  


                                                                      Fiscal Year Ended                          
                                                      Dec. 28, 1996     Dec. 30, 1995     Dec. 31, 1994          
                                                                                                                 
Cash flow from operating activities:                                                                             
  Net income                                            $   7,771         $ 35,073          $ 33,134             
  Reconciliation of net income                                                                                   
    to net cash and cash equivalents provided                                                                    
    by operating activities-                                                                                     
      Depreciation and amortization                        65,534           52,094            44,600             
  Changes in assets and liabilities-                                                                             
      Receivables, net                                    (31,430)         (44,751)          (18,010)            
      Inventories                                         (13,638)         (12,155)           (2,833)            
      Prepaid royalties and other                         (17,113)            (652)             (403)            
      Accounts payable and other                           28,024           13,351           (17,072)            
      Accrued payroll                                      13,130              (71)              891             
      Unearned revenue                                      9,321           11,750             2,593             
      Income taxes payable                                 (1,964)           1,131             2,835             
      Other accrued expenses                                4,513               58               314             
  Net cash provided by                                                                                           
      operating activities                                 64,148           55,828            46,049             

Cash flow from investing activities:                                                                             
  Restricted deposits                                      (5,013)          19,795           (27,158)            
  Investments                                                  --               --             5,000             
  Purchases of property and equipment, net                (80,617)         (38,923)          (40,256)            
  Capitalized software costs                              (34,170)         (23,444)          (19,116)            
  Foreign currency translation adjustment                   2,868            2,861             2,326             
  Other assets, net                                       (15,600)          (4,262)              399             
    Net cash used for investing activities               (132,532)         (43,973)          (78,805)            

Cash flow from financing activities:                                                                             
  Notes payable, net                                       18,779          (18,291)           27,158             
  Proceeds (payments) under capital lease obligations      14,662             (719)           (3,293)            
  Long-term debt payments, net                                 --             (256)              (51)            
  Stock issuance proceeds, net                             10,983           23,059            12,247             
    Net cash provided by financing activities              44,424            3,793            36,061             

Net increase (decrease) in cash and cash equivalents      (23,960)          15,648             3,305             
Cash and cash equivalents at beginning                                                                           
  of period                                                61,939           46,291            42,986             
Cash and cash equivalents at end of period              $  37,979         $ 61,939          $ 46,291             


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 provider of          
scalable data center ready open systems solutions for large organizations       
spanning diverse industries.  Sequent designs, manufactures and markets high-   
performance symmetric multiprocessing (SMP) and Cache Coherent Non-Uniform      
Memory Access (CC-NUMA) computer systems and operating environment software.    
The Company's systems are widely used for large-scale on-line transaction       
processing (OLTP), applications in decision support systems (DSS) and data      
warehouses, for custom applications built upon relational database management   
systems (RDBMS), and as the central server in client-server architectures.      
Sequent's project-oriented offerings include a complete portfolio of customer,  
professional and education services to solve complex Information Technology     
(IT) problems. The Company has an established set of partnerships with other    
software, hardware and services providers to deliver complete solutions to its  
customers.                                                                      

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

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 income (expense) in the consolidated  
statements of operations.  Net losses aggregating $0.3 million and $0.8         
million, for 1995 and 1996 respectively, were realized from such transactions.  
During 1994 the Company realized a net pretax gain of $1.1 million as a result  
of positive impact of changes in exchange rates, primarily in the United        
Kingdom.                                                                        

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 $2.8  
million at both December 28, 1996 and December 30, 1995.                        

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 $20 million.  The agreement expires May 30, 1997.  At December 28, 1996 and  
December 30, 1995, accounts receivable in the accompanying consolidated         
balance sheets is net of $20 million and $14 million, respectively, received    
by the Company under this agreement.                                            

 The Company had no single customer that represented greater than 10% of
total revenue in 1996, 1995 and 1994.                                           

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 which provide for prepayment of future licenses and        
royalties based on sales of certain software.  Prepaid licenses and royalties   
were $28.4 million at December 28, 1996 and $3.6 million at December 30, 1995,  
and are stated at the lower of cost or net realizable value.  Approximately     
$16.1 million and $1.2 million were included in prepaid royalties and other     
current assets at December 28, 1996 and December 30, 1995, respectively.  Such  
prepaid amounts are realized by receipt of reverse royalties from the vendors   
based upon software sales by the vendor, and/or by charging cost of products    
sold for certain software sales by the Company.                                 

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 $38.4 million at         
December 28, 1996 and $58.3 million at December 30, 1995.  Amortization,        
generally based on a three-year straight-line basis, was $20 million in 1996,   
$16.6 million in 1995 and $12.8 million in 1994.  All other research and        
development costs are expensed as incurred.                                     

   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.                                                                       

 Per Share Information.  Primary earnings per share is computed based on
the weighted average number of common and dilutive common equivalent shares     
outstanding.  Outstanding stock options, net of assumed buy-back, are common    
stock equivalents.  The computation of fully dilutive earnings per share also   
assumes conversion of the remaining 7.5% Convertible Subordinated Debentures    
issued April 1992 when it would be dilutive.  A fully diluted earnings per      
share amount is not shown as the effect of the debentures would be              
antidilutive.                                                                   

 Consolidated Statement of Cash Flows.  The Company considers short-term
investments which are highly liquid, readily convertible into cash and having   
original maturities of less than three months to be cash equivalents for        
purposes of the statement of cash flows.                                        

  Total cash expenditures for income taxes were $5.9 million, $5.3 million
and $2.3 million during 1996, 1995 and 1994, respectively.  Interest paid does  
not differ materially from interest expense.                                    

   Non-cash investing and financing activities include the following: 1996 -
300,000 stock warrants, valued at $1.2 million using the Black-Scholes pricing  
model, were issued in exchange for other non-current assets; 1995 - $1 million  
of Convertible Debentures were converted into 63,000 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.                                                                      

  Reclassifications.  Certain prior year amounts have been reclassified to
conform to fiscal 1996 presentation.  These changes had no impact on            
previously reported results of operations or shareholders' equity.              

New Accounting Pronouncements.  In October 1995, the FASB issued      
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-     
Based Compensation" (SFAS 123).  SFAS 123 allows companies to choose whether    
to account for stock-based compensation on a fair value method or to continue   
to account for stock-based compensation under the current intrinsic value       
method as prescribed by APB Opinion No. 25,  "Accounting for Stock Issued to    
Employees."  The Company adopted SFAS 123 during 1996, and has elected to       
continue to follow the provisions of APB Opinion No. 25.  (Note 8)              

2.   INVENTORIES                                                                
(in thousands)                                              
                       December 28,     December 30,
                     1996             1995

Raw materials          $ 14,205          $ 9,385  
Work-in-progress          2,166            1,736  
Finished goods           58,120           49,732  

                     $ 74,491         $ 60,853

Finished goods inventory includes evaluation systems aggregating $30.8
million and $15.7 million as of December 28, 1996 and December 30, 1995,        
respectively.  Such systems are located at potential customer sites for         
demonstration.                                                                  

3.   PROPERTY AND EQUIPMENT                                                     
(in thousands)                                              
                               December 28,     December 30,
                               1996             1995

Land                             $   5,037        $   5,037     
Operational equipment              174,662          134,897     
Furniture and office equipment      89,951           67,010     
Leasehold improvements              22,584           15,974     
                              292,234          222,918

Less accumulated depreciation                                   
and amortization                (158,396)        (124,753)  
                            $ 133,838        $  98,165

   Depreciation and amortization charged to expense totaled $44.9 million in
1996, $35.0 million in 1995 and $31.8 million in 1994.                          

4.   NOTES PAYABLE                                                              

The Company has an unsecured line of credit agreement with a group of 
banks which provides short-term borrowings up to $70 million (increased in the  
third quarter of 1996 from $50 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.  The line of credit agreement extends through May 30, 1997.  At        
December 28, 1996, $12.2 million was outstanding under this line of credit      
agreement.  At December 30, 1995, there were no borrowings outstanding under    
the line of credit.  The interest rate on this borrowing at December 28, 1996   
was 8.25%                                                                       

   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.  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 1996, the Company re-negotiated the agreement and     
extended it through July 1997.  The foreign bank, without cause, can terminate  
the agreement at any time.  At December 28, 1996, maximum borrowings allowed    
under the agreement were $57.2 million.  Amounts outstanding were $44.7         
million and $39.6 million at December 28, 1996 and December 30, 1995,           
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 December 28, 1996 was 4.8%.        

In addition to the above borrowing agreements, the Company has entered
into certain other miscellaneous borrowing arrangements with a foreign bank.    
Amounts outstanding were $0.9 million and $1.5 million at December 28, 1996     
and December 30, 1995, respectively.  The interest rate on these borrowings     
was 1.5% at December 28, 1996.                                                  

During 1996 a U.S. subsidiary of the Company entered into a financing 
arrangement with third parties for $2.2 million, of which $1 million is with a  
related party.  The financing consists of short-term convertible notes with an  
interest rate of 10% due February 23, 1997.  At the option of the holders, the  
notes may be converted into capital stock of the subsidiary.                    

5.       OBLIGATIONS UNDER CAPITAL LEASES AND LONG-TERM DEBT                    

In April 1992, the Company issued $20 million of 7.5% Convertible     
Subordinated Debentures ("Convertible Debentures" or "Debentures") due March    
31, 2000.  In conjunction with the Company's equity offering in 1993, $9.9      
million of the Debentures were converted into 626,000 shares of common stock    
and are no longer classified as long-term debt.  The Convertible Debentures     
are convertible into the Company's common stock at the option of the holders    
at an initial conversion price of $15.81 per share.  Under this provision, in   
August 1995, an additional $1.0 million of the debentures were converted into   
63,000 shares of common stock, further reducing long-term debt.  Beginning on   
June 30, 1997, the Company is required to make quarterly principal payments of  
$1.7 million through 1998 to retire the outstanding Debentures.  The balance    
outstanding on the Debentures was $9.1 million at both December 28, 1996 and    
December 30, 1995.  At December 28, 1996, $5.0 million is classified as         
current obligations.  The Convertible Debentures are callable at the option of  
the Company after five years.  The Debentures contain certain financial         
covenants, including restrictions on additional debt, minimum net worth levels  
and a prohibition on the payment of dividends.                                  

 Sequent 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.  The cost  
of equipment under capital leases was $0.3 million and $0.4 million at the end  
of 1996 and 1995, respectively.  Accumulated amortization was $0.1 million and  
$0.3 million, respectively.  These leased assets are pledged as security for    
capital lease obligations.                                                      

In addition to the above capital leases, 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:  

1997                             $  3,285       
1998                                3,285       
1999                                3,960       
2000                                4,095       
2001                                2,730       
Total minimum lease payments                  17,355                  

Less amount representing interest             (2,849)                 

Present value of minimum lease payments     $ 14,506                  

6.   OPERATING LEASE COMMITMENTS                                                

Sequent is committed under operating leases for office space and      
manufacturing facilities.  Future minimum lease payments are as follows:        

(in thousands)                                                        

1997                   $19,052      
1998                    16,468      
1999                    13,051      
2000                    10,558      
2001 and thereafter     22,390      
                 $81,519

Rent expense for operating leases was $17.4 million, $14.9 million and
$15.1 million in 1996, 1995 and 1994, respectively.                             

7.   INCOME TAXES                                                               

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

(in thousands)                                                        

                      Fiscal     Fiscal     Fiscal
                      1996       1995       1994

Domestic                      $  5,593    $ 29,556   $ 27,332         
Foreign                          5,083      17,771     11,468         
Total                       $ 10,676    $ 47,327   $ 38,800       

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

                      Fiscal     Fiscal     Fiscal
                      1996       1995       1994

Current:                                                              
Federal                     $   789    $  5,890    $ 1,420        
Foreign                       3,109       5,435      3,769        
State                           164         355         96        
                      4,062      11,680      5,285

Deferred:                                                             
Federal                        (900)         --         --        
Foreign                        (257)        574        381        
                     (1,157)        574        381

Total provision               $ 2,905    $ 12,254    $ 5,666          

Deferred tax liabilities (assets) are comprised of the following                
components:                                                                     

(in thousands)                                                        
                                     Dec. 28,     Dec. 30,
                                     1996         1995

Research and development                  $ 22,998     $ 17,534       
Other                                        1,567        2,929       
Gross deferred tax liabilities              24,565       20,463       

Net operating loss carryforwards:                                     
Domestic                                 (24,985)     (21,677)    
Foreign                                   (7,965)      (8,733)    
Credit carryforwards                       (12,741)     (10,720)      
Expenses not currently deductible           (7,971)      (7,586)      
Depreciation                                (1,596)        (798)      
Revenue currently taxable                   (1,399)        (945)      
Inventory basis differences                   (556)      (1,337)      
Restructuring costs                            (71)        (188)      
Gross deferred tax assets                  (57,284)     (51,984)      
Deferred tax asset valuation allowance      31,583       31,542       
Net deferred tax liability (asset)        $ (1,136)    $     21       

The provision for income taxes differs from the amount of income taxes          
determined by applying the U.S.  statutory federal tax rate to pre-tax income   
due to the following:                                                           

                                    Fiscal     Fiscal     Fiscal
                                    1996       1995       1994

Statutory federal tax rate             35.0%      35.0%      35.0%    
State taxes, net of federal benefit     4.2        4.2        4.2     
Tax benefit from Foreign                                              
Sales Corporation                    (6.8)      (1.6)      (3.9)  
Tax provision on foreign earnings      (0.9)      (2.1)      (0.1)    
Realized benefit from net                                             
operating losses                     (1.3)      (9.6)     (20.9)  
Other, net                             (3.0)        --        0.3     
                                   27.2%      25.9%      14.6%

 The deferred tax asset valuation allowance in fiscal years 1994-1996 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 $31.6 million has    
been provided at December 28, 1996.  When and if these reserved deferred tax    
assets are ultimately realized, $15.5 million will reduce the Company's         
federal and state tax provision and $16.1 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 net deferred tax asset at December 28, 1996 and the net deferred tax        
liability at December 30, 1995 reflect foreign liabilities offset by U.S.       
assets.                                                                         

The Company has accumulated unused research and development credits of
$5.0 million for income tax purposes.  These credits expire from 1998-2011.     
The Company also has Alternative Minimum Tax Credits (AMT) which may be         
carried forward indefinitely and certain state tax credits which expire from    
1997-2001.                                                                      

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 1996 and 1995, $175,000 and $4.7 million   
of benefits were credited to paid-in capital, respectively, with a related      
reduction in current taxes payable.  No benefits were recognized in 1994.       

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.  In 1995, $1.0 million of convertible debentures were   
converted into 63,000 shares of common stock.  (Note 5)                         

Stock Compensation Plans.  At December 28, 1996, the Company had the  
following stock-based compensation plans:                                       

Stock Option Plans                                                              

At December 28, 1996 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 and the 1996 Stock Option Plan.  Options granted after May 18,   
1995 were made under the 1995 Stock Incentive Plan and the 1996 Stock Option    
Plan.  As of December 28, 1996, the Company has reserved a total of 12,365,000  
shares of common stock for issuance under these Plans, of which 6,909,440       
shares were outstanding at December 28, 1996.  Employee and non-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 5,550,000     
shares of common stock in a series of eighteen-month offerings.  At December    
28, 1996, there were 1,674,002 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 1996, 1995 and 1994, Sequent issued 682,864, 576,423 and 467,479 shares  
under the plan, respectively.                                                   

Statement of Financial Accounting Standards No. 123                             

During 1995, the Financial Accounting Standards Board issued SFAS 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 FASB Statement 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)                         Fiscal       Fiscal                
                       1996         1995

Net income (loss)     As reported      $7,771      $35,073                
      Pro forma          (709)      30,959

Primary earnings (loss)                                                   
per share             As reported       $0.23       $1.04                 
     Pro forma         (0.02)       0.91

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 1995 and 1996:                                   

                      Fiscal      Fiscal
                      1996        1995

Risk-free interest rate                 6.05%       6.33%                 
Expected dividend yield                   --          --                  
Expected lives                        3 years     4 years                 
Expected volatility                       50%         55%                 

The fair value of the employees' purchase rights was estimated using the        
Black-Scholes model with the following assumptions for 1995 and 1996:           

                      Fiscal      Fiscal
                      1996        1995

Risk-free interest rate                 5.58%       5.23%                 
Expected dividend yield                   --          --                  
Expected lives                         1 year      1 year                 
Expected volatility                       50%         55%                 

The weighted-average per share fair value of those purchase rights granted in   
1995 and 1996 was $15.51 and $13.15, respectively.                              

A summary of the status of the Company's stock option plans as of December 28,  
1996 and December 30, 1995, and changes during the years ending on those dates  
is presented below:                                                             

                                                        · Enlarge/Download Table
                                   (in thousands, except per share)                                            

                                                  Fiscal                           Fiscal                      
                                                   1996                             1995                       
                                                     Weighted-Average                    Weighted-Average      
                                          Shares        per share           Shares          per share          
                                       under option   Exercise Price     under option     Exercise Price       
                                                                                                               
Outstanding at beginning                                                                                       
  of year                                 5,068          $ 14.26             4,432          $ 11.63            
Granted:                                                                                                       
  Price = Fair Value                      3,353            12.60             1,716            18.21            
  Price < Fair Value                      1,196            11.12               612            14.90            
Exercised                                  (196)            8.53            (1,056)            9.68            
Forfeited                                (2,512)           16.55              (636)           14.78            
Outstanding at                                                                                                 
  end of year                             6,909            12.27             5,068            14.26            
Options exercisable                                                                                            
  at year-end                             1,446                              1,276                             

Weighted-average per share fair value of                                                                       
  options granted during the year        $ 3.69                             $ 8.46                             

The following table summarizes information about stock options outstanding at                                  
December 28, 1996:                                                                                             


                                 OPTIONS OUTSTANDING                              OPTIONS EXERCISABLE          
                                                                                                  Weighted-    
                       Number      Weighted-Average   Weighted-Average           Number            Average     
   Range of         Outstanding        Remaining          per share           Exercisable          per share   
Exercise Prices     at 12/28/96    Contractual Life     Exercise Price        at 12/28/96        Exercise Price

                                                                                                               
    $0 - $10.50      1,573,560        7.0  years          $  9.55               553,826            $  8.61     
$10.63 - $11.88      1,700,109        8.1                   11.38               264,476              11.59     
$11.90 - $13.88      1,435,227        7.7                   12.86               272,295              13.28     
$13.92 - $14.00      1,502,886        8.0                   14.00                  --                  --      
$14.03 - $22.31        697,658        7.3                   15.62               355,511              15.77     

 $0.00 - $22.31      6,909,440        7.7                   12.27             1,446,108              11.79     


9.     GEOGRAPHIC SEGMENT INFORMATION                                           

Information about the Company's foreign operations and export sales is
provided in the table below.  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.         

(in thousands)                                                                

                   Fiscal          Fiscal           Fiscal
                   1996            1995             1994
Revenue:                                                                        
United States           $  270,571       $  244,029      $   233,246        
Foreign:                                                                    
Europe                   262,396          242,133          177,320      
Other                     41,443           32,784           24,624      
Export:                                                                     
Other                     20,952           21,399           15,633      
               $   595,362       $  540,345      $   450,823
Operating income (loss):                                                        
United States          $     5,825       $   27,184      $    27,773        
Foreign:                                                                    
Europe                     7,424           18,290            9,444      
Other                       (374)           3,045            2,260      
              $     12,875       $   48,519      $    39,477
Identifiable assets:                                                            
United States         $    448,527       $  367,196      $   321,857        
Foreign:                                                                    
Europe                   148,727          123,614          105,232      
Other                     14,755           13,113            8,888      
              $    612,009       $  503,923      $   435,977

Intercompany sales between geographic areas, primarily from the United
States to Europe, were $155.7 million during 1996, $131.0 million during 1995   
and $111.1 million during 1994.                                                 

10.     FOREIGN CURRENCY EXPOSURE                                               

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 December 28,  
1996, the Company also has a forward exchange contract denominated in Japanese  
yen with a contract amount of approximately $2.8 million.  This forward         
contract is used to hedge certain intercompany payables.  The Company has also  
purchased off-setting currency options and calls used to hedge certain          
anticipated but not yet firmly committed transactions expected to be            
recognized within one year.  Gains and losses on such contracts have not been   
significant to date.                                                            

11.     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 and debt are reflected in the consolidated financial statements at 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.                                                           

   Due to the private nature of the Company's convertible debentures and the
subjectivity of assessing the impact of the Company's future common stock       
price, the fair value of long-term debt is judged to be materially the same as  
that reflected in the 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.                           

12.     COMMITMENTS AND CONTINGENCIES                                           

 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 December 28, 1996 and    
December 30, 1995, and the results of their operations and their cash flows     
for each of the three years in the period ended December 28, 1996, 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.                                                        

PRICE WATERHOUSE LLP                                                            

Portland, Oregon                                                                
January 23, 1997                                                                

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

                 Total           Gross            Net         Earnings
                Revenue          Profit          Income      Per Share

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

Fiscal 1995                                                                     
First quarter    $  116,099      $   52,689      $   5,953      $   0.18    
Second quarter      139,207          65,082         11,010          0.33    
Third quarter       133,215          59,565          7,441          0.22    
Fourth quarter      151,824          67,056         10,668          0.31    
Year           $  540,345      $  244,392      $  35,073*     $   1.04  

  *The sum of quarterly net income does not equal annual net income due to
rounding.                                                                       

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

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                      

1995:                                                                           
First quarter              $   20.63          $  15.56                      
Second quarter             $   18.63          $  14.44                      
Third quarter              $   25.25          $  17.88                      
Fourth quarter             $   19.50          $  14.38                      

At December 28,1996, there were approximately 1,134 shareholders of   
record of the Company's common stock and 34.2 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 and the agreements relating to the      
Company's Convertible Debentures prohibit 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. (Czechoslovakia)               

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                     

                                                      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 and 33-59611) of     
Sequent Computer Systems, Inc. of our report dated January 23, 1997 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 Schedules.                                    

PRICE WATERHOUSE LLP                                                            

Portland, Oregon                                                                
March 21, 1997                                                                  

Dates Referenced Herein   and   Documents Incorporated By Reference

This 10-K Filing		Date		Other Filings
		3/28/92
		4/10/92
		5/6/92
		5/12/92
		8/13/92
		11/13/92
		12/2/92
		1/2/93
		1/8/93
		3/18/93
		4/5/93
		10/1/93
		11/1/93
		1/1/94
		12/12/94
		12/31/94		10-K, DEF 14A
		4/18/95
		5/18/95
		7/21/95
		12/30/95		10-K
		1/15/96
		1/30/96
		3/1/96
		3/27/96
		8/20/96
		10/1/96
		12/2/96
For The Period Ended		12/28/96
		1/23/97
		2/23/97
		2/28/97
		3/21/97
		3/25/97
Filed On / Filed As Of		3/26/97
		5/30/97
		6/30/97
		3/31/0
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