Dose of Mercury leaves HP's vision blurry

Three months after closing 'the industry's biggest acquisition this year', HP still hasn't mapped out a view for its software future
Written by Colin Barker, Contributor on

At $4.5bn (£2.29bn), HP's takeover of Mercury Interactive earlier this year was not only the biggest software acquisition in HP's history but "the biggest software acquisition for the entire industry" during 2006, according to Tom Hogan, HP's vice president in charge of the company's software effort, on Tuesday.

But if the 3,800 HP software, customers and partners who gathered in Vienna, Austria, for the HP Software Universe conference this week were expecting to have the details of exactly how HP was going to incorporate Mercury into its software strategy spelled out for them, they were to be disappointed. No details were released.

Mercury, which provides products to manage application development, is a large company for HP to incorporate. In revenue terms it is roughly the same size as the rest of HP's software business, from Open View to printer drivers, put together. Hogan, though, sees few problems in simply absorbing Mercury and moving on.

Hogan explained that HP's software business, excluding Mercury, is hugely profitable. For the fourth quarter of 2006, the HP software business had a "17.2 percent operating [profit] margin declared", said Hogan, and he has targeted 10 to 15 percent growth for the next year.

"We are now sixth in the world in software," said Hogan, "a position not many people would have put us in". And a very big proportion of that business now comes from Europe, with the EMEA business now accounting for 45 percent of HP software's sales, more even than the US at 40 percent. But HP executives later admitted that this situation was not going to remain for long. After the Mercury books have been transferred to HP, which happens on 1 February, the US will overtake EMEA thanks to its stronger Mercury business.

The aim is simple. "To establish HP as the trusted adviser in software," Hogan said. But what remained unclear is exactly how this is to be achieved. Hogan stressed HP's strengths in software and pointed to new technologies, especially Mercury's specialisation of business technology optimisation (BTO), as ways forward for customers, without mapping out how HP intended to help them establish them in their organisations. But HP is "dead serious" about it anyway, it appears.

"Make no mistake," Hogan said, "HP is dead serious about our commitment and investments in software." 

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