Mercury - rising or falling?
News came over the wires last night of HP's agreement to acquire Mercury (Interactive Corp) - in a transaction worth roughly $4.5 billion, which equates to HP paying a 33% premium on Mercury's current stock price.
HP's CEO, Mark Hurd, has obviously been bullish about the acquisition's potential to create an IT management vendor powerhouse. CNet's news.com
reported Hurd as saying
"I am confident that this transaction means HP is building a software business that must be reckoned with"
and
"[the Mercury acquistion helps us in] building an ERP (enterprise resource planning)-like capability for the management software market."
On paper, it looks like a great match. There's very little product overlap, and the resulting product portfolio will certainly look pretty meaty - enabling the combined company to monitor and manage network and hardware infrastructure, application performance and availability, and even software project portfolios. Mercury's growing hosted services business will doubtless provide some interesting opportunities for growth within HP's services business, and of course the recently-acquired Systinet also brings some important SOA lifecycle management capabilities to the mix, which complement HP's investments in identity management and web services management. We predicted that HP might look to Mercury - see our
April report (page 7).
But.
Hurd's reference to "ERP for IT management" is about creating an application suite which helps customers wanting to run their IT operations like standalone businesses - managing resources and projects, maximising quality and improving processes, balancing supply against demand, analysing service delivery metrics, and so on. It's a theme that is increasingly visible in the strategies of all the major systems management vendors - notably IBM, BMC, and CA. It's also now part of HP's story - and it takes HP well outside its infrastructure management comfort zone. It's a concern because ERP has hardly been a huge success, and because we suspect that Hurd is getting caught up in his own rhetoric, which is focused too much on investors and not enough on customers.
This is a major, major software acquisition for HP and the company's track record in stepping outside its comfort zone is shaky. Recent small-scale acquisitions (Peregrine, Talking Blocks, TruLogica, Trustgenix, AppIQ, technology from Baltimore) seem to have worked out OK - but Mercury is a seven-course gourmet blowout in comparison to these light snacks (even the Peregrine acquisition was only 10% the size of this one). Mercury gets involved in an awful lot of business-focused work that HP just isn't used to doing, and this may be too much of a stretch.
Like we always seem to end up saying in these situations (
Adobe-Macromedia;
Sun-Seebeyond;
Attachmate-WRQ) we're going to hold off from cheering this one until HP can prove that key Mercury personnel - and, of course, customers and partners - stay on the ship. It would be darned easy for Mercury to become
Bluestone MkII.
One last thing: if the "IT resource planning" vendor theme continues - our bet is that
Compuware will be the next on someone's shopping list.
