July 26 2006: 9:22 AM EDT
NEW YORK (Reuters) -- Hewlett-Packard agreed on Tuesday to buy Mercury Interactive for about $4.5 billion in stock, or $52 per share, in a bid to expand the computer maker's business software operations.
The deal, which sent shares of the No. 2 personal computer maker down 4 percent, should help boost sales of HP's (Charts) OpenView systems management software, which makes it easier for far-flung businesses to monitor the hardware, software and networks running throughout their organizations.
The purchase of the former star Israeli technology company also puts HP in closer competition with other major systems management software providers, including IBM's Tivoli unit, CA Inc.'s UniCenter and BMC Software.
Since last year, a number of top Mercury executive have left amid a regulatory probe into its stock option granting practices. The financial scandal drove Mercury, once a top performing stock, to delist from the Nasdaq market.Folks, you may not realize it, but this is major. Until about a year ago, over 75% (up to 90% depending on which year and which report you read) of the total revenue in the test automation and test management tools market went to Mercury, Rational and Segue since the beginning of the "Dot-Com Era". Over the last 13 months this seemingly consistent market has been turned on it's head: