Embattled IT performance and management vendor Mercury Interactive Corp. yesterday announced it will acquire privately held Systinet Corp., one of the pioneers in the SOA registry space, for $105 million in cash. Subject to customer and regulatory conditions, Mercury expects the transaction to close in the first quarter.
The acquisition is "an important and strategic step, not unlike other strategic moves the company has made," said Anthony Zingale, CEO at Mercury in Mountain View, Calif. "Despite the challenge we're going through as a company and all of the financial restatement work, we continue to be able to execute in the marketplace, listen closely to customers and execute against our strategic agenda."
Mercury is in the process of restating its financials, going back to fiscal year 2002. The company was delisted on Nasdaq as of January 4, 2006, because it did not meet the deadline for being in full compliance with Nasdaq listing requirements.
Given its recent difficulties, Mercury "had guts to make the acquisition," said Jason Bloomberg, senior analyst at ZapThink LLC, in Waltham, Mass. "Mercury has been looking at the SOA management space for a while. With the combination of Mercury and Systinet, Mercury will be a strong company."
The biggest question is the cloud over Mercury, Bloomberg said. "Once Mercury gets out of the problems it's in now, it will be a stronger company," he said. "We saw CA [Computer Associates] go through the same thing and come out a better company."
The acquisition also marks the beginning of consolidation in the SOA governance and lifecycle space, according to Bloomberg. "We always figured Systinet would be the first to go. They have quite a bit of traction, and great relationships with BEA, HP and Oracle. [Mercury] got their money's worth."
According to Mercury's Christopher Lochhead, chief marketing officer, Systinet's products will be "foundational technology" for Mercury's BTO Enterprise, announced in October. BTO (business technology optimization) Enterprise is an integrated suite of products addressing application change lifecycle, application performance lifecycle, IT governance, quality, performance and business availability.
"This move significantly expands the definition of BTO," Lochhead said. "Over time, [Systinet technology] will be included in a lot of Mercury BTO Enterprise, as well as a set of products that are standalone."
Systinet president and CEO Thomas Erickson and Roman Stanek, founder and chief software architect, will continue to lead Burlington, Mass.-based Systinet as a standalone business unit, according to Mercury. "They've done a great job growing the business," Lochhead said. "We don't want to disrupt their operation. We want the integration to be as natural as possible. Over time they will become a core part of Mercury."
Lochhead also said Mercury will be investing in Systinet's R&D team in Prague and leveraging Mercury's channel and customer base, as well as its brand and marketing. "This is an investment move for us," he said.
Mercury also plans to leverage Systinet's partnerships. "We hope, with all of Systinet's partners, to not only maintain the relationships, but to grow them," said Lochhead. "Systinet has done a very good job playing the Switzerland game in SOA."
Mercury has existing partnerships with Systinet partners BEA and Oracle. Systinet also partners with HP, where there is "some overlap," Lochhead said, but Mercury is open to exploring that relationship. Systinet partner BMC is "probably the most dead-on competitor" with Mercury, he said.
"HP, IBM, CA and BMC will definitely have to reevaluate their relationships with a Mercury-managed Systinet," said William A. Mougayar, vice president and service director at Aberdeen Group in Boston.
Miko Matsumura, vice president of technology standards at Systinet competitor Infravio Inc., in Cupertino, Calif., said Mercury may take some time to get used to the complex RFPs and partner relationships in the SOA marketplace. "It's going to take them quite a while to figure out how this space works," he said. "You can't just sell your product. You have to know how it relates to everything else a customer is using."
In addition, Matsumura said, "One of the tricky things in registry/repository is you're managing both machine and human assets. It's social software. It involves understanding organizational and political behavior as much as systems."
Brent Carlson, co-founder and vice president of technology at LogicLibrary Inc. in Pittsburgh, another Systinet competitor, said the acquisition "is another indication that the registry/repository market is maturing rapidly. Mercury has taken a step forward by acquiring an operational UDDI registry."
ZapThink's Bloomberg said to expect more consolidation in the SOA governance and lifecycle area. "2006 will be the year the products will mature. This won't be the last acquisition we see."