HP doubles software with US$4.5bn raid on Mercury

HP is to acquire management software provider Mercury Interactive for US$4.5 billion, a move which will double HP’s software business and add to its capabilities in application management, application delivery, IT governance and service-oriented architecture.

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By  Dylan Bowman Published  August 6, 2006

HP is to acquire management software provider Mercury Interactive for US$4.5 billion, a move which will double HP’s software business and add to its capabilities in application management, application delivery, IT governance and service-oriented architecture. HP’s software business has not performed well in recent years and only recently moved into profit, despite having well-regarded products such as its network management software product line OpenView. Company president and CEO Mark Hurd told analysts the deal would strengthen HP’s software business, in particular OpenView and technology it acquired in its purchase of US asset and service management software provider Peregrine Systems last year for US$425million. “HP is building a software business to be reckoned with,” Hurd said during a conference call announcing the deal. “We are going to look to synergise these businesses, and we think they together provide a software powerhouse and that’s what we are going to go execute,” he added. Mercury currently operates in the region through its Dubai-based master reseller Tech Access and has around 100 customers including big names such as Aramco and Du. Samer Karawi, HP Middle East marketing manager for enterprise business, said the integration of the Mercury systems under the OpenView umbrella would take about six to eight months to complete. “The Mercury product portfolio is very complementary to what we are offering,” Karawi commented. “OpenView addresses the question from an IT perspective and Mercury addresses the same product but from a business perspective,” he added. Umar Malik, Tech Access vice president for finance and professional services, said going forward there was no clear direction yet as to whether HP was going to keep Mercury as a separate business unit or absorb it fully. “We are in discussions with HP right now to figure out what is the best way forward. There is still a lot of work to be done as to how the relationships are going to work, but we have the full support of Mercury,” Malik stated. Analyst firm Gartner said the deal was a move HP “had to make” to remain a significant, long-term player in operations and application management software. “The deal will improve the competitive position of HP’s OpenView product against traditional rivals BMC Software, CA and IBM,” Gartner said in a recent online advisory. “If HP successfully integrates the core products of both companies, the result could exceed the sum of its parts by providing for a comprehensive IT planning and control,” it stated. However, Gartner highlighted the vendor’s poor record of integrating software acquisition as a stumbling block to maximising the potential of the deal. “HP has a weak track record with software acquisitions, and the size of this purchase makes it more of a merger, which has even greater complexity,” the firm said. “HP is still digesting its December 2005 acquisition of Peregrine, and this move may distract it from efforts under way,” it went on to state.

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