Mercury Interactive pays $147 m. for software maker

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SUNNYVALE: Software maker Mercury Interactive Corp. on Monday said it bought
all of the outstanding stock of Freshwater Software, a private vendor, in a
all-cash deal valued at $147 million.

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Sunnyvale, California-based Mercury, which tests and makes tools for testing
software and Web performance, said the purchase of Freshwater's products, that
gauge application performance and availability, will strengthen its offerings,
add 3,000 customers to its base and boost earnings in the first quarter of 2002.

"Both Freshwater Software and Mercury Interactive are focused on
delivering superior business value and service to our customers. We see a great
synergy between our companies and a natural fit to our software solutions,"
said Mercury’s chairman, chief executive and president Amnon Landan.

Mercury's purchase comes amid selective buying of small private companies -
or those firms' software - by more established players, including International
Business Machines Corp., PeopleSoft Inc. and Sage Software Inc., a subsidiary of
Sage Group Plc.

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Mercury, which did not change financial guidance for 2001 as a result of the
purchase, expects the Freshwater acquisition to add about $20 million to
revenues and increase earnings in 2002, Sharlene Abrams, Mercury's chief
financial officer told Reuters. The company did not give 2002 guidance.

During its current second quarter, Mercury will take one-time cash charge of
$1.5 million to $2 million related to the acquisition, Abrams said. The merger
would be accounted as a ‘purchase transaction’. Freshwater will operate as a
wholly owned subsidiary under Mercury's Application Performance Management (APM)
business unit. Freshwater's Boulder, Colorado office will remain open and four
of its five co-founders are expected to remain with Mercury.

Donna Auguste, Freshwater's president and chief executive will leave the
company after a short transition period to pursue philanthropic interests,
Mercury said in a release.

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(C) Reuters Limited 2001.

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