HP's software stock rises with Mercury buyout

$4.5b deal expected to bring more complete management package.

By Jennifer Mears , Network World , 07/31/2006

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HP has been snapping up software companies for the past couple of years, but its plans to acquire application-management specialist Mercury Interactive should give the system vendor the boost it needs to convince customers it is serious about software, analysts say.

Last week's $4.5 billion deal also should bring a more complete management package to HP and Mercury Interactive customers as they attempt to control applications better from development to deployment to operations.

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HP buying spree
While the $4.5 billion Mercury Interactive deal is its largest since the Compaq merger, HP hasn't been shy about snapping up software companies. A look at some of HP's recent buys:

•	July 25 —Announces an agreement to buy software management and services firm Mercury Interactive for $4.5 billion.
•	February 2006 —Says it will buy database archiving vendor OuterBay. Terms of the deal are not disclosed.
•	November 2005 —Details plans to buy identity management vendor Trustgenix for an undisclosed amount.
•	October 2005 —Says it plans to purchase Linux blade management specialist RLX Technologies. Terms of the deal are not released.
•	September 2005 —Announces deal to buy IT asset management firm Peregrine Systems for $425 million.
•	September 2005 —Announces deal to acquire storage management vendor ApplQ. Terms of the deal are not disclosed.
•	March 2004 —Announces plans to buy TruLogica for its automated user provisioning software for an undisclosed amount.
•	February 2004 —Says it will buy change and configuration management firm Novadigm for about $120 million, as well as IT workflow management company Consera Software for an undisclosed amount.

Click to see: For a look at some of HP's recent buys

"OpenView is very good at systems management, database management, but overall application management is something they've been lacking," says Jim Maas, solution monitoring engineer at Fresenius Medical Care in Lexington, Mass. He is a longtime HP OpenView customer and has been looking for application-monitoring tools to better meet the needs of about 2,400 clinics worldwide.

"Bringing in Mercury Interactive will be a good thing," he says.

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Maas, who heads up the New England chapter of HP's OpenView user group, says that for the most part, HP customers are optimistic about the acquisition, the largest since HP merged with Compaq in 2002.

"It's really wait-and-see, as far as how they're going to integrate Mercury," he says. "But, overall, it's viewed as a very good move."

If HP is successful in merging Mercury into its corporate culture, it should find itself in a stronger position in the management software market, where it faces competitors such as BMC Software, CA and IBM. Until now, industry experts often have questioned HP's commitment to its software business.

"HP's strategy for becoming a powerhouse in network and systems management, and their focus on the adaptive enterprise - where you use technology to optimize business operations - has got an excellent foundation," says Richard Ptak of Ptak, Noel & Associates. "The problem they've had in the last couple of years has been the [lack of] credibility they have as a software provider."