HP buys Mercury

This weekend I was bantering with Thomas Otter of SAP about SOX and his response was its GRC focus was more around governance, less around compliance. And I responded then he ought to look at what Mercury has done in that space. With their acquisition of Kintana a few years ago they started positioning themselves in that space. Along with their testing suite and other IT management and SOA governance tools, Mercury had evolved in to "an ERP suite" for the CIO

So HP's acquisition makes sense as it competes for the data center against IBM, CA, BMC, CompuWare. This complements its own OpenView systems management product line. It also broadens its own software revenue stream, still tiny compared to Microsoft, IBM, Oracle.

Since its options scandal and related restatement and SEC scrutiny, Mercury has been rumored as a takeover candidate. I guess EMC and Oracle, two logical candidates have M&A fatigue after their spate of acquisitions. This is HP's first major acquisition since Compaq.

Mercury has largely grown in recent years through acquisitions. Will HP have to continue that posture or get enough synergies from its larger channel and OpenView leverage?

Update: James Governor adds a few more perspectives

Comments

[Jason Wood]

Vinnie,

I would question your assertion that Mercury has largely grown through acquisition. Actually most of their M&A has been tuck in.

Their IT Governance suite started via the acquisition of Kintana, and then they layered Tefensoft and Systinet on top; but combined those three companies have been de minimous contributors to Mercury's growth. It WOULD be fair to say that those combined entities (and the IT Governance suite) are important growth drivers going forward, but looking back, Mercury has been one of the best organic growth stories in software.

Prior to Kintana the most noteworthy purchase was Freshwater and that was more about protecting the APM market from commoditization at the low end than driving revenue growth.

Cheers,

J

[Chris Benedetto]

HP and Mercury now provide a strong solution for governance and network management. This should catapult them to a leadership position around SOA management and apply pressure to industry rivals such as IBM and Oracle.

But I see this as more than just a data center play. This is good for SOA adoption overall as IT builders and vendors need consolidated solutions that address heterogeneous environments.

If HP wants to really take the game to its competition, the next step is to see what solutions HP can provide for monitoring, testing and validation of everything that is happening underneath the SOA or "behind the screens" and at the application, integration and protocol infrastructure level. That’s the layer that supports the SOA, so it will be interesting to see if they take the next step as network monitoring and application testing tools just don't go to this level of introspection (yet).

As an independent vendor of end to end SOA and integration testing, Solstice's is encouraged by this news as it validates our thinking that SOA and service management must be tied to effective governance and quality assurance testing capabilities.

Chris Benedetto
Vice President Marketing, Solstice Software
www.solsticesoftware.com

[vinnie mirchandani]

Jason, numbers wise you are likely right...it just appeared the preferred mode to get in to new area of focus was to buy versus build

[Eric Risley]

Vinnie:

Thanks for the perspective. From my perspective it's a deal that's been wanting to happen for years. See my post at:http://architectpartners.typepad.com/architect_partners_llc/2006/07/transaction_ale_1.html for another perspective.