What's going on at Mercury Interactive Corporation (Nasdaq: MERQ)? On Monday, business technology optimization software maker Mercury announced a series of top executive appointments. The press release was ostensibly routine, but reading between the lines suggests that this is far from the case. In fact, the information likely to interest investors is the details not published in the announcement (though implied by it), as well as the information not given prominence in it.
The first point that should sound the alarm is the replacement of Mercury VP products Zohar Gilad by Yuval Scarlat. Moreover, although Gilad is apparently moving to another position in the company, the announcement fails to say what it is.
Scarlat may be a uniquely talented manager and he may deserve the appointment. Nevertheless, it's very hard not to wonder why Gilad, who, as VP products, lead Mercury Interactive to very impressive achievements, is no longer in this position.
Under Gilad's leadership, Mercury invented the field of applications performance management, becoming its leader. Thanks to its entry into this field, Mercury achieved business successes that astonished the capital market and the entire high-tech industry, precisely during its crisis years. Furthermore, Gilad was the manager who was largely responsible for the acquisitions of Kintana in June 2003 and Freshwater Software in May 2001. These two acquisitions are considered critical moves that helped put Mercury on the path of rapid growth. In other words, Gilad was largely responsible for the key measures that boosted the company and are likely to continue to do so.
As I said, the press release about the executive appointments did not state what Gilad's new position would be (odd in itself), although it will presumable be a promotion. Software industry sources believe that Gilad will be appointed SVP for strategy. Just what an SVP for strategy does is unclear, but what is clear is that Gilad, considered one of the most talented executives at Mercury, already knows how to give substance to the role.
Nonetheless, the question remains: Why was he replaced? Gilad enjoys high esteem, not only from Mercury's customers, but also from many of the company's employees, in all its areas of activity. Although Gilad will be a general in the company, it's still unclear how many troops will serve under him.
The severing of this relationship with most of Mercury's employees, even if only temporary, should itself raise some questions about the changes underway in the company. As things stand now, it is not clear whether Gilad is simply exhausted from years of intensive work, or whether something is going on in the company liable to leave its mark in the coming years.
As for Scarlat, in his new position as VP products, he will now be one of the top two executives closest to Mercury chairman, president and CEO Amnon Landan. The other executive considered particularly close to Landan is Mercury VP corporate development David Murphy. We can only wait and see if corporate politics, which the company has avoided until now, are beginning to infiltrate at company headquarters.
Another odd point in the press release is that Mercury VP R&D Ori Danieli is leaving. Although he was not one of Mercury's founders, he was one of the second wave of initial employees.
Danieli was once voted one of the top ten R&D managers worldwide. Maybe he wanted a time-out after ten years at Mercury. Nevertheless, it is not clear why the statement to the US Security and Exchange Commission (SEC) was formulated in such as was as to downplay his leaving.
Furthermore, it should be noted that Danieli is the second executive to leave Mercury in the past six months. When it published its financial report for the third quarter of 2003, Mercury announced that COO Kenneth Klein was leaving.
As for the new appointments, Boaz Chalamish will replace Danieli as VP R&D, and Scarlat will take over international products in his capacity as VP products. International products includes products management, business units, and administrative services. Scarlat was VP and general manager applications delivery unit (software testing, calibration, and other products). Scarlat joined Mercury in 1990, serving as VP technical services, director of customer support, and in other positions.
The press release also states that Jay Larson has been appointed Mercury Interactive VP of Americas field operations. He will be responsible for sales, customer support, and professional services in the Americas. Larson joined Mercury in July 2000, and has 20 years experience in sales and sales management from technology companies including Network Associates (NYSE:NET), Siebel Systems (Nasdaq:SEBL), and Oracle (Nasdaq:ORCL).
Published by Globes [online] - www.globes.co.il - on March 3, 2004