Mercury Interactive Corporation

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Mercury Interactive Corporation

1325 Borregas Avenue, Building A
Sunnyvale, California 94089
U.S.A.
Telephone: (408) 822-5200
Toll Free: (800) 837-8911
Fax: (408) 822-5300
Web site: http://www.mercuryinteractive.com

Public Company
Incorporated: 1989
Employees: 2,100
Sales: $400.1 million (2002)
Stock Exchanges: NASDAQ
Ticker Symbol: MERQ
NAIC: 511210 Software Publishers

Mercury Interactive Corporation helps corporate customers optimize the performance of their software applications. The company's software testing products detect flaws in software systems, enabling a customer to test realistic work scenarios automatically. Mercury's customers include Ford Motor Co., Sony Corporation, Barnes & Noble.com, Citibank, and Ameritrade. The company operates in 26 countries, ranking as one of the leaders in a fast-growing industry.

Origins

Mercury's formation in the late 1980s was the work of two Israeli entrepreneurs, Amnon Landan and Aryeh Finegold. The pair first met in 1985, four years before working together on the idea that gave birth to Mercury. Landan would serve as the junior partner of the collaborative effort. Although the older, more experienced Finegold spearheaded Mercury's formation, he eventually was succeeded in the company's guidance by Landan, who represented the principal figure behind the electric success of Mercury at the beginning of the 21st century.

Amnon Landan was raised in suburban Tel Aviv, the son of an engineer who also served as a career officer with the Israel Defense Forces. As required by Israeli law, Landan joined the army at age 18 in 1976, beginning his mandatory military service in a hotbed of hostilities. Landan, trained to be a paratrooper, was stationed in the region Israel etched out of Lebanon, an area that served as a buffer zone for the defense of Israel. Landan found himself thrust into intense action, required to make nightly helicopter drops and conduct covert searches for opposing forces. In this role, Landan excelled, rising quickly through the ranks of the Israel Defense Forces. His responsibilities increased and his ability to lead others became evident, giving him skills that would be called upon in his civil career as Mercury's leader. By the time he was 20 years old, Landan was leading a platoon of 25 soldiers, distinguishing himself as a commando. When he was 21 years old, Landan was put in charge of a company, responsible for leading 65 soldiers. After his obligatory four years of service, Landan was discharged from the Israel Defense Forces.

At the age of 22 in 1981, he embarked on a road trip with his future wife, driving across the United States in a battered Chevy Vega. The couple slept on a mattress in the back of the car, taking out the back seats to make room for their bed. During the trip, Landan stopped in the area that would later provide the fertile soil for the explosive growth of the nascent software industry. Landan's stop in California's Silicon Valley was symbolic, foreshadowing his return later and his eventual rise to become one of the region's most promising business leaders. In 1981, however, Landan was fresh out of the military without any advanced education.

After returning to Israel, Landan went back to school. He enrolled at the Technion-Israel Institute of Technology, an institution favorably compared to the esteemed Massachusetts Institute of Technology in the United States. Landan worked part-time as a software programmer to pay for his tuition and earned a bachelor's degree in computer science in 1985. Next, Landan was hired by an electronic design automation firm named Daisy Systems, a Mountain View, California-based company founded by Aryeh Finegold. Landan was hired to become part of the company's Israel-based research staff. Not long after joining the company, Landan was assigned to the company's U.S.-based research team and returned to Silicon Valley. He joined Daisy just as the company was reaching its peak, having grown from a startup concern in 1980 to a $122 million company in 1985. Quickly, however, the company's fortunes reversed, its success transmogrifying to despair as its technology aged. In mid-1986, Daisy's stock value plummeted, falling from $37 to $5 per share. In response, the company's board of directors removed Finegold.

Mercury Taking Shape in 1989

After the sudden collapse of Daisy, Finegold was appointed to a new executive position. He was picked to lead a new startup company called Ready Systems. Colleagues at Ready Systems encouraged Finegold to hire Landan as a programmer. After initially accepting Finegold's offer, Landan reneged. The two future partners next met at Daisy's 1989 annual meeting. At the time of their meeting, Finegold had already raised $5.5 million from venture capitalists who were compelled by his business plan. Aside from capital, Finegold needed expertise to make his plan work. He turned to Landan, explaining that he wanted to develop software that could assist in what soft engineers called "regression testing." Finegold described a product that would automate one of the most tedious aspects of passing a software product through the trying maturation from development to deployment, from creation to practical use. In the incremental process of developing new software applications, programmers had to retest any modified code, making sure that each change to the original code complied with specific requirements and that the viable parts of the original code remained untouched. Fine-gold hit upon a demand that was barely discernible during the late 1980s, but his vision would prove prescient. As the software industry experienced explosive growth during the next decade and the business world became increasingly dependent on the use of computers, Finegold's business plan became an instrumental component of keeping new software working at its optimal level. Landan agreed to join Finegold's new startup venture. Together, the pair worked to deliver Mercury's message to the business world.

Finegold and Landan began collaborating in 1989, working together to develop software and hardware tools that tested the compatibility of software and hardware manufactured by other companies. "Testing software systems is not rocket science," Landan remarked in a May 18, 1998 interview with Forbes. "In fact, it's boring," he said. "It's also been the first place to cut corners if deployment is behind schedule." Software applications often contained flaws in their code that manifested themselves once subjected to the rigors of practical use. To the user, glitches appeared, glitches that frustrated personal computer users and glitches that portended profound problems for corporate users. According to one consulting firm, Dennis, Massachusetts-based Standish Group International, seven of every ten new software systems failed in some way upon deployment. For companies that depended on software applications to effectively operate and manage their businesses—a dependence that applied to virtually every company in existence during the 1990s—the glitches and flaws were capable of bringing a business to its knees. Mercury presented itself as a source of salvation for corporate clientele, offering software that tested realistic work scenarios automatically.

When Landan first joined Finegold at the inception of Mercury, he began running one of two development groups based in Israel. Mercury began shipping its first software testing tools in 1991. The company generated its first profit two years later, the same year it converted to public ownership and the same year Landan left Israel and joined Finegold in Silicon Valley. Landan came to the United States in 1993 to run the company's operations, intending to stay for only a few years, but he spent the next six years in California working with Finegold to strengthen Mercury's market position. In 1995, he was named president of the company, assuming responsibility for worldwide sales and ensuring that the company did not overlook significant advancements in technology. During these pivotal years of growth in the software and computer industries, Mercury's products were certified as standard testing tools for major software producers such as PeopleSoft and Oracle.

Mercury in the Late 1990s

By 1998, the company was beginning to hit its stride financially, registering vigorous growth in a burgeoning industry. The testing software market generated $150 million worth of business in 1996, and was expected to be a $1.2 billion market by 2001. Mercury, which controlled more than one-third of the testing-tools market in 1998, stood to benefit substantially from the energetic growth of the industry. The company was recording a net profit margin of 16 percent by addressing the ever increasing needs of corporate customers. In 1998, for example, Mercury offered a software package that addressed problems stemming from Year 2000 issues, marketing TestSuite2000, which detected date-related glitches in software applications.

Mercury dominated its market largely because the company was able to nimbly respond to the increasing needs of potential customers. One market of great importance during the late 1990s was e-commerce, a sector that recorded phenomenal growth. Mercury developed a substantial position in the e-commerce sector during its 10th anniversary year, a milestone that also marked Finegold's exit from the company. When Finegold departed in 1999, Landan was appointed chairman of the board, taking resolute control over the company just as it began recording fast-paced growth. Much of the company's financial success was attributable to its development of e-commerce application-testing products. Within nine months in 1999, the revenue generated from Mercury's web-based business increased from 10 percent of sales to 70 percent of sales. The enormous growth of Mercury's Web-based business ignited the company's financial growth. Revenue, which totaled $77 million in 1997, swelled to $188 million in 1999.

Company Perspectives:

We help companies create long-term value through optimizing technology and business performance.

By the beginning of the 21st century, Mercury was garnering praise for helping to develop a market vital to the success of software applications in the corporate world. In 2000, sales leaped 64 percent, reaching $307 million. During the year, the company ranked as one of Fortune magazine's 100 Fastest Growing Companies. Barron's magazine ranked Mercury ninth on its list of the best managed public companies. One of the most astute decisions made by Landan during this period was to plough the company's profits back into research and development efforts. Landan's insistence on developing new growth engines for the company led to the creation of Topaz and ActiveWatch, two performance-monitoring products that cost $150 million to develop. By 2003, Topaz and ActiveWatch ranked among Mercury's fastest-growing products.

As Mercury's 15th anniversary approached, Landan continued to explore new business opportunities for the Sunnyvale, California-based company. New markets were penetrated by reinvesting profits and by acquiring companies that fleshed out the company's technological abilities. In the summer of 2003, the company completed two major acquisitions, adding assets that pushed the company's sales volume toward the $500 million mark. In May, Mercury acquired Performant, Inc., a Bellevue, Washington-based private firm equipped with technology that enabled users to diagnose and rectify software performance problems. In June, Mercury acquired Kintana, Inc., paying $225 million for the $44.5 million-in-sales company. Kintana, which also was based in Sunnyvale, developed software that helped companies prioritize the importance of technology projects. As the company plotted its future course, further acquisitions were expected. Other, larger software firms were increasing their interests in the lucrative testing-tools market, which portended increased competition for Landan's enterprise. In the years ahead, as the industry consolidated, Mercury's continued success depended on its ability to stay on the technological vanguard and beat back competition from well-financed concerns. With Landan at the helm, there was every expectation that the success of the first 15 years could be repeated in the years ahead.