Hewlett-Packard's deal to acquire Mercury Interactive is winning praise from HP software customers and analysts as a smart combination of system and application management tools.
HP announced Wednesday that it had reached an agreement with Mercury in a deal worth about $4.5 billion. The buyout had been rumored for at least a year. After the announcement, HP CEO Mark Hurd said the move will double his company's software revenue to more than $2 billion annually, adding that the combination of the companies' product lines will make HP "an end-to-end leader in IT management."
That sentiment was echoed today by several HP OpenView (OV) customers.
Mercury products will "enhance or complement" HP OV tools that focus on performance and availability of systems and IT Infrastructure Library processes, said Karen Semonson, co-leader of the Wisconsin User Group -- a local chapter of the OpenView Forum International, an independent group of HP software users.
Semonson said she wants access to Mercury's IT Governance Center and IT Availability Center tools to enhance the service management road map at Foremost Farms USA in Baraboo, Wisc., where she is information systems operational services manager.
Those Mercury tools would add capabilities to HP's OV Service Desk and OV Operations tools, she said.
"I am always happy to see that HP continues to strengthen [its] position in the marketplace, because it provides us as customers with a solid foundation to grow our operational road maps without doubting that HP OpenView will be here tomorrow," Semonson said.
Joe Gersch, treasurer of OpenView Forum International, which has more than 6,000 members, said Mercury has "great technology" that will add performance management tools and applications management tools to the HP OV portfolio. The prospect of a Mercury acquisition has been discussed by HP users for months, giving them plenty of time to weigh the ramifications, he said.
"As I have talked to OV users, they say Mercury has a very good suite of products, and some actually said, 'I wish Mercury were a part of OV,' " Gersch said. In general, he added, Mercury tools are "a pretty strong complement, with just a little bit of overlap" to HP's OV tools.
Mike Aubert, co-leader of the Colorado chapter of the OpenView Forum, said that HP "already has application and performance management tools," which would overlap with some Mercury tools. "But I'm sure HP can incorporate the tools," he added.
Overall, Aubert said HP offers what he sees as the strongest set of management products on the market, since the company relies on a "building block" approach -- allowing a firm to start small and add more tools later. His company, which he refused to name, has used OV products for more than eight years. "With the major competitors, you seem to need to purchase a lot more software upfront," he said. "I would think this acquisition would make HP a stronger competitor" with IBM Tivoli, CA Inc., and BMC Software, he said.
Sandra Potter, executive director of the HP Forum, agreed that the acquisition is "more complementary than overlapping" and said that her organization would look for ways to assist Mercury users in the future. "Acquisitions tend to add turmoil for a while, and there are the normal concerns about that," she said. "But our user group has the opportunity to help."
Several analysts said the move is a good match of products, although many noted that HP paid a premium for Mercury. Haw Wu, an analyst at American Technology Research, in Greenwich, Conn., said the purchase price was "steep" compared with Mercury's predicted sales, and he noted that although HP was looking for complementary products to its own portfolio, "the synergies with HP OV ... are not as clear" as HP implied.
Wu explained that more than 60 percent of Mercury's revenue comes from software products focused on the testing and development of software, with only 30 percent from application management and just 10 percent from IT governance and resource management.
Mercury's stock value had dropped with the departures of top Mercury executives last year over a stock-option scandal, which probably affected the timing of the acquisition, said Rick Sturm, an analyst at Enterprise Management Associates in Boulder, Colo.
"That loss in market capitalization produced an opportunity that HP pounced upon," said Zeus Kerravala, an analyst at Yankee Group Research in Boston.
Nonetheless, Kerravala and Sturm called the two product sets a good match. "HP was good at systems and network management but weak in anything application-oriented," Kerravala said.
Tony Baer, an analyst at onStrategies in New York, disagreed with analysts who argued that HP will gain Mercury's service-oriented architecture management capabilities. Baer said that Mercury had not yet developed products or strategies for governance of SOA environments.
However, Mercury purchased Web services registry vendor Systinet earlier this year, providing it with technology that could do well when paired with HP's SOA Manager. Until now, that product has been "somewhat of an orphan in the HP software group," Baer said.
Richard Ptak, an analyst at Ptak, Noel & Associates in Amherst, N.H., said the acquisition is good for both Mercury and HP customers.
"Mercury customers will feel comforted, with the cloud of uncertainty that hung over [its] future definitively ... removed," Ptak said. "HP customers ... can confidently look to HP integrating and extending software life-cycle management from development through deployment and from nitty-gritty [systems] operations task to rarefied IT governance strategies."
This story, "Users: HP buy of Mercury Interactive makes sense" was originally published by Computerworld.