ALKHOBAR, 1 August 2006 — HP has signed a definitive agreement to purchase Mercury Interactive Corp., an IT management software and services company, through a cash offer for $52 per share, or an enterprise value of approximately $4.5 billion — a premium of about 33 percent. HP forecasts that on a non-GAAP basis, the combined HP Software business will deliver revenue growth of approximately 10 percent to 15 percent and operating margin of approximately 20 percent in fiscal year 2008. HP expects to commence the tender offer for Mercury Interactive shares promptly and the merger is expected to close in the fourth quarter of calendar year 2006.
“Today, we are combining two market-leading businesses to create the most powerful management software portfolio in the industry,” said Mark Hurd, HP CEO and president. “Together, they will help customers cut their IT costs, speed the delivery of new services and drive profitable growth at HP.”
Mercury CEO and President Tony Zingale added, “Together, HP and Mercury instantly become the industry’s premier provider of business technology optimization (BTO) software. A deal of this magnitude creates significant opportunities for our customers, our shareholders, our people and our partners.”
The transaction brings together the strength of HP OpenView systems, network and IT service management software with Mercury’s strength in application management, application delivery, IT governance and service-oriented architecture governance. The Mercury acquisition is expected to increase the size of the HP Software business to more than $2 billion in annual revenue. Immediately following the close of the transaction, Mercury will become part of the HP Software business and both companies’ sales forces will begin reference-selling each others’ products.
Mercury Interactive was founded by Israeli entrepreneurs, Aryeh Finegold and Amnon Landan in 1989. Brand names associated with Mercury include Mercury Topaz, Performant, Kintana, Appilog, Systinet and VSI/Tefensoft. Mercury’s 700 employees in Israel will augment 1,500 other fulltime HP employees in Israel. Mercury has a campus that includes R& D at Yehud, near Tel Aviv. HP has its own HP Labs R&D facility in Haifa. According to Nemeretes Research, this newest merger in the management software market highlights management’s re-emergence as hot technology. It also shows the deepening importance of end-to-end service delivery management as an organizing principle in corporate IT, both driven by and driving the broader adoption of Information Technology Infrastructure Library (ITIL) as a governance framework. Nemerets pointed out that Mercury began reorganizing its software around ITIL compatibility over three years ago, and gained PinkElephant certification for its governance and availability products in 2005. HP began acquiring ITIL-oriented companies a couple of years ago and building out its own ITIL-oriented IT service management (ITSM) offerings.
“In Nemertes’ current research into service delivery and management, nearly everyone we have spoken with who is using HP OpenView is actively considering replacing it,” said John Burke, principal research analyst, Nemertes Research Inc. “Their focus, often, is shifting to a more application-centered view of their infrastructure. At the same time, nearly everyone is acknowledging the influence ITIL is having on their organizations, especially in the way they align IT services with business needs.”
He continued, “Given that, HP’s acquisition of Mercury — which has strong offerings in application management, application delivery, and overall IT governance built around ITSM — is right on target. The two companies’ software currently has little overlap, and the gaps Mercury fills are significant as general IT thinking tilts towards ITSM concepts. Indeed, in our research, many OpenView users were already filling some gaps in their application performance and delivery management with Mercury’s tools.”
Nemeretes advises enterprises thinking of dropping OpenView because of a shift to ITIL-inspired processes and methods to put their plan into neutral for a few months and wait to see “how the dust settles” on this merger.
