Mercury CEO: HP acquisition thrills customers

Tony Zingale arrived at Mercury Interactive in 2004 and took over as CEO after his predecessor and two other top executives were dismissed amid allegations over stock options irregularities. Even as Mercury continues to cooperate with a formal investigation by the Securities and Exchange Commission, it is in the midst of an acquisition by Hewlett-Packard. Zingale spoke with Computerworld about his past year, the planned HP buyout and the coming integration of Mercury and HP products.

You've lived through quite a year with a federal investigation of stock options activities at Mercury, the departure of your predecessor and last week's news of an HP purchase worth US$4.5 billion. How has it felt?

I actually feel great about the outcome, just to jump right to the conclusion. It has been a super outcome for all the constituencies. The HP deal is a strategic fit. There's not a lot of product overlap. It is a cultural fit. Lastly, it is a good economic deal for both companies. I am very, very satisfied and thrilled with the outcome.

But I have to ask what you tell your customers who are worried that the investigation of your stock options by the SEC is not over. Is that problem behind you?

The restatement is behind us. We've completed all the necessary restatement work in and around restating 10 years of financial results. That's behind us. We recertified all the company's revenues and expenses, so that set of issues is behind us for sure.

So what have you and the company learned as a result?

We've learned that you have to stay focused on running your business. And it's not just us [facing investigation]; there are about 80 companies facing a similar set of issues. A company needs good corporate governance, good processes; and you've got to have a great business to keep your executive team focused on. The situation I came into at Mercury was one of having a great product line and a great business, but unfortunately I came into a set of issues beyond my control that I had to clean up. I used the management team and all their professionalism and maturity to get this set of issues behind us. And what I was after was sustaining the business and the growth that Mercury was capable of.

Do your big customers bring up the investigation anymore?

Sure, and they're thrilled the restatement is behind us. What lends credibility to it is that 80 other companies are just beginning a similar [investigative] process.

Even with the HP acquisition plans, you're going to hold your Mercury World user event in Vegas in October?

Yes, it's full speed ahead for Mercury World. We get 3,000 to 4,000 customers usually at the annual show, with a full range of partners. Last year, we announced 25 new products. This year they'll want to know what's new with the potential integration with HP's systems management and OpenView products.

Are any of your biggest customers worried about losing Mercury products or that an independent company will be gone? What's the general reaction been?

I met with five different major customers after the announcement last week, and they were all thrilled for several reasons. First, HP is a brand known and highly recognizable and very valued around world,. Combine that with HP's reach, investment capability, continued investment in software through acquisitions and the $4.5 billion acquisition of Mercury, and that was a big, big statement.

Mercury is formidable in the business technology optimization [BTO] realm, has testing prowess and IT governance capability. When you combine that with the richness and depth that HP has with IT service management and network management and OpenView products, you get pretty much an incomparable set in the market. No vendor offers that portfolio in the market. And senior executives want to do business with fewer vendors, rather than more. Some customers may not be happy with the purchase. I'm sure it's not unanimous, but there was a resounding thumbs-up.

Some thought a big part of the reason HP bought Mercury was to get at some intellectual property Mercury might have in the service-oriented architecture management area. Was it?

That would be a big check to write to get at SOA technology, although the purchase includes that capability. It's to get BTO and everything from our testing tools to our SOA registries. Also, HP had a thriving relationship with Systinet, which provides SOA governance software. But Mercury acquired Systinet in January for $105 million. HP gets the whole product portfolio and market position and selling channel and technology work force.

So SOA tools are growing in importance. But you are still very big in testing software, with about 60 percent of Mercury revenues there?

Yes, 60 percent is from testing, down from 80 percent in revenues from testing tools a year ago. So it's still a thriving market, but we're moving more to applications management, IT governance and SOA governance -- and we think that shift will continue with the highest growth in application management, SOA and IT governance and change management software. You always want to look through the windshield and look where the market opportunities are.

Is HP hoping for access to the Mercury customer base to sell its own products?

Not really. That's secondary.

Just to be clear, what products are included in the testing tools market?

It's not an application development tool, so it's performance testing, load testing, quality management and business process testing for what we call application delivery. It's a long list, with hundreds of variants, some in the LoadRunner line. We are the premier vendor for what we call application delivery and quality and performance testing. It's a comprehensive line, developed over our 16 years in business. We have 30,000 users for all our products, not just testing products.

Management companies are making lots of news about their configuration management databases. Will your CMDB stay in place in the merger?

It's to be determined if that stays. HP has service desk capability from its Peregrine acquisition. Our CMDB is more about end user monitoring, mapping and change management. There's an opportunity there to take the best of both worlds.

How much overlap is there between HP and Mercury products?

Very little. There's certainly none in the testing realm. Certainly very little in the IT governance realm, none in the SOA governance realm.

What is your role going forward?

I'm working to get closure on the HP deal over the next 90 to 120 days, and then we'll see what happens after that. I'm also working with about 3,000 Mercury employees on integrating our technology with HP's.

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