HP moving into IT

HP stockholders got over humpday last week upon hearing the news that their firm had signed a definitive agreement to purchase Mercury Interactive Corp., an IT management software and services company. The cash tender offer was US $52 per share, for an enterprise value of approximately US $4.5 billion.

Experts see the acquisition as instantly establishing HP’s portfolio of IT management software as a valid option for the large-scale operation. Did I write “large-scale”? No less than HP chief executive officer / president would agree: "Today,” he said, “we are combining two market-leading businesses to create the most powerful management software portfolio in the industry. … We expect this important acquisition to deliver significant value for our shareholders." And Mercury chief executive officer / president agrees: "Together, HP and Mercury instantly become the industry’s premier provider of business technology optimization (BTO) software.”

HP’s business plan reportedly seeks to combine the relative strengths of HP OpenView systems, network and IT service management software with Mercury’s strength in application management, application delivery, IT governance and service-oriented architecture governance. "HP’s software strategy is to be the clear leader in end-to-end enterprise IT management," said Thomas E. Hogan, senior vice president, Software, HP.

The Mercury acquisition is expected to increase HP Software business to over US $2 billion in annual revenue. HP financial forecasters told shareholders that the combined HP Software business will deliver revenue growth of approximately 10 percent to 15 percent and an operating margin of approximately 20 percent in fiscal year 2008.

The acquisition will be conducted by means of a tender offer for all of the outstanding Mercury shares, followed by merger of Mercury with an HP subsidiary. HP and Mercury today held webcasts and / or conference calls detailing the deal.