HP Purchases Mercury Interactive

Hewlett-Packard on Tuesday signed a $4.5 billion agreement to purchase business software maker Mercury Interactive. HP will pay $52 per share for Mercury in a deal that will combine that company's suite of application management software and services with HP's OpenView family of network and IT service management software, according to HP. The deal is the first big acquisition for new CEO Mark Hurd, and the largest since HP bought Compaq for $19 billion in 2002. Mercury Interactive is on the fringe of the emerging business technology optimization (BTO) market, products designed to manage and track the performance and profile of enterprise applications and reduce the costs associated with deploying them. Most notably the company has invested heavily in the development of SOA, which allows companies to break applications into small, configurable elements. By combining Mercury's strengths in BTO, application change management, SOA, and IT governance with its own OpenView platform, HP intends to become an "end to end" IT management company by offering products and services that can track IT assets from planning through deployment, said Thomas Hogan, senior vice president of software at HP, in a released statement. The deal is subject to a number of conditions, partly due to Mercury Interactive's recent financial woes, but is scheduled to close in the fourth quarter of 2006. Leading up to the acquisition, Mercury had been the target of an SEC probe of the company's accounting methods in 2005. That investigation led to the resignation of the company's CEO and CFO in November 2005, resulting in Mercury's removal from the Nasdaq in January 2006. Asked about the legal problems HP would inherit by buying Mercury Interactive, HP CFO Bob Wayman said, "Frankly, we cannot fully protect against some potential liability. We think we have our arms around them. We think they are very manageable," during a press conference. Despite its financial problems, Mercury has continued to grow through a recent acquisition spree. In January the company purchased SOA provider Systinet for $105 million, and last month announced plans to purchase technology, research, and development staff, and facilities from Vertical Solutions and Tefensoft. The merger could strengthen HP's ability to sell software used by businesses to manage their computer networks, IT applications, and Web-based applications, a market that HP has had little penetration in thus far, according to Carey Schwaber, an analyst with Forrester Research. "These are very attractive products that even controversy was unable to deter companies from adopting," she says. "This is a real expansion for HP software." From the SOA side the acquisition has the potential, barring integration issues, to create "the most comprehensive, end-to-end, SOA-governance solution in the market," says Miko Matsumura, vice president of technology standards at Infravio. "Mercury Interactive's big play into the SOA sector was their acquisition of Systinet. Now HP has that technology. This is an interesting mergence of technologies, but one that could weigh heavily in the world of IT departments." Related articles: Mercury Interactive Will Acquire Systinet SOA Simple A Big Blue Boost For SOA Strategy