HP buys Mercury to strengthen software

$4.5bn spend on software testing and IT governance software specialist Mercury Interactive

HP is to pay $4.5bn to acquire software testing and IT governance software specialist Mercury Interactive. The move brings to an end months of speculation about Mercury’s future following its Nasdaq delisting in the wake of an accountancy scandal last year.

Despite an ongoing investigation, during which the US Securities and Exchange Commission (SEC) has said it may pursue civil charges against several Mercury directors, HP insisted it was happy with its due-diligence process. The deal, subject to regulatory approval and Mercury filing results for last year, is expected to close by the end of the year.

Speaking on a conference call, HP chief executive Mark Hurd said that combining HP’s OpenView management software with Mercury’s testing, application governance and service-oriented architecture (SOA) management suites will allow his firm to offer “end-to-end management of the entire IT lifecycle”. He added, “[Together] we can build an ERP-like capability for the management software market.”

Alan Rodger of analyst Butler Group said there was little overlap between the vendors’ lines, so the deal is likely to be welcomed by customers of both firms. “OpenView never really covered end-to-end requirements and Mercury plugs big gaps in HP’s application and service management, testing, and SOA governance capabilities,” he added.

However, Neil Macehiter of analyst Macehiter Ward-Dutton argued that while the deal looks good on paper and bolsters the credibility of HP’s software arm, “the jury is still out” on HP’s ability to handle the integration effectively. “HP has a chequered history [integrating acquired firms] and this deal is of a magnitude bigger than its typical software purchases,” he said.

The proposed deal may prompt more speculation about consolidation in the IT management, testing and governance software market, with BMC, Compuware and Borland all likely to be touted as acquisition targets. “CA has bought Wily; now HP has bought Mercury and we’ll see more consolidation as vendors look to build end-to-end [IT governance] abilities,” said Macehiter.