HP buys Mercury Interactive for US$4.5 billion

HP and Mercury Interactive Corp.’s channel partners sounded uncertain Wednesday about how the combination of management software and application development products would mesh following their US$4.5-billion acquisition announcement.

The deal, which was announced late Tuesday, is HP’s largest acquisition since its US$19 billion purchase in 2002 of Compaq Computer Corp. under former chief executive Carly Fiorina. Mercury Interactive, which is based in Mountain View, California, is best known for testing and performance products such as BTO enterprise and Quality Center. It was also the focus of a stock options probe in the United States, which led to the resignation of three senior executives and its delisting from Nasdaq earlier this year.

HP has been trying for several years to bolster is management software business, which is based around the OpenView product line, but it has been criticized for being expensive and unsuited to mid-market customers. 

“I am confident that this transaction means HP is building a software business that must be reckoned with,” HP chief executive Mark Hurd said in a teleconference call announcing the deal.

Canadian HP OpenView partners said it would take time before they understood more clearly whether the addition of the Mercury portfolio would open up new areas of opportunity within their own businesses.

“I don’t know the applications from Mercury that well,” admitted Gilles Laferrière, director of consulting services at PCD Solutions in Montreal. “(Network and application management) are very different areas . . . I think there’s room to focus on one of them.” 

PCD, for example, has deployed OpenView in a variety of customer settings, and in some cases works with partners such as Deloitte on more comprehensive projects.

“If we’re installing software on service desks, we’re going to focus on integrating the software with the processes that are in ITIL,” he said, referring to the IT Infrastructure Library set of best practices. “We’re not the ones that will define the processes, but we’ll make the bridge between the tools.” 

Edward Pham, president of Real IT Management Inc. in Ottawa, said the combination could appeal to large corporate clients, particularly if they have a lot of in-house development work going on. 

They do need to have an application to manage their development site, but the percentage is fairly small,” he said. “It can help handle the change management and the release cycle for those applications. There has been some interest among a few of our customers, but I’m not pursuing any new business around that right now.” 

Mercury has been trying to recruit Canadian resellers for its own products since 1997. Last year, the company hired former PeopleSoft Canada general manager Andy Aiklen to run its Toronto office. Earlier this year, the company signed a deal in which SAP Canada agreed to resell Mercury’s LoadRunner software. Spokespeople for SAP Canada did not return phone calls at press time.

Solstice Software, based in Claymont, Del., competes with Mercury in some areas of software and application testing, but has been its partner in other areas. Chris Benedetto, Soltice’s vice-president of marketing, said the HP takeover will provide better visibility into system performance, and validates the need for management control and assurance over a variety of businesses.

“The verdict is out — and I remain cautiously optimistic — as to whether HP will take Mercury and OpenView and make a decision to get beyond the data centre and network management environment and get into apps that work on a horizontal way,” he said. “Today’s business processes are a collection of applications that need to work as a single process. You’ve got billing, for example, an inventory system and a partner system. The next step is to manage that from a SLA point of view, but make sure there’s integrity for all those things to work together.”

HP said it expects to close the deal in the fourth quarter of this year, and that Mercury will increase the size of its business to more than US$2 billion in annual revenue.

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