ROOTS BUSINESS; Roots in Israel, Head in Silicon Valley
The New York Times Scott Harris
Profile of Mercury Interactive, a leader in obscure software-testing market; company, based in Sunnyvale, Calif, with roots in Israel and offices in 25 countries, thrives while most software companies struggle; under Amnon Landan's leadership, Mercury helps companies tune software they already own; photo (M)
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BACK when the term Y2K sent shivers through the business world, Mercury Interactive happily catered to companies that needed to check system upgrades, solidifying its position as a leader in the obscure software-testing market. As the year-2000 business played itself out, Mercury executives spied a new opportunity.

''One day in early 1999, we said the Web is the future -- we have to focus our efforts,'' Amnon Landan, the chief executive, recalled.

Mercury Interactive, a Silicon Valley company with roots in Israel and offices in 25 countries, soon became a force in the new field of Web management. Its client list now includes about 75 percent of the nation's 500 largest companies; government institutions like the State Department, Army, Navy and Air Force; CBS's Survivor.com; and the author Stephen King. While software testing provides the bulk of Mercury's business, Web management has grown to produce more than 20 percent of revenue in just over two years.

Now Mercury has repositioned itself again, having figured out a way to profit from the dot-com implosion by helping businesses tune information technology they already own. Industry and financial analysts say Mercury is strengthening its grip as the market leader in fields that are growing in importance, while most software companies are struggling. Mr. Landan, who is also president and chairman, concurs.

''Short term, the downturn is not good for us,'' he said, citing reduced revenue and a stock price about half its level of a year ago. ''Long term, it's actually positive.''

Mercury's resilience was reflected in its first-quarter performance. In the 10 days leading up to its April 12 report, Mercury stock shed 30 percent of its value, a slide attributed to revenue warnings from software giants like Oracle and the conflict in Israel, home to a quarter of Mercury's 1,600-member work force, including most of its research and development staff. But when the quarterly report was issued, it included 18 percent growth in revenue, and earnings of 14 cents a share beat Wall Street forecasts by 4 cents. The stock jumped 25 percent in a day.

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