MERQ - Mercury Interactive Message Board

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Technology Stocks : MERQ - Mercury Interactive

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To: techanalyst1 who wrote (508)	4/12/2002 9:01:29 AM
From: MGV	of 512

MERCURY INTERACTIVE [MERQ] BUY $29.44 MC:$2.6B Deutsche Banc Alex Brown § Mercury posted stellar F1Q results. License revenue of $56M (down 9% y/y) easily beat our $51M estimate and Street consensus of $54M. EPS of $0.14 blew past our estimate and Street consensus of $0.10. § Mercury saw strong demand across all product lines and geographies. Management attributes its solid quarter to (1) an easy to recognize ROI story, (2) a new quota structure for its sales force, and (3) packaged application "shelfware" still to be deployed, and (4) a move toward vendor consolidation. § Management maintained prior guidance for FY02, based on improving backlog and visibility despite the difficult environment seen by other software vendors in 1Q. Guidance for FY02 is $380-415M in total revenue, $247-270M in license, and $0.60-0.72 in EPS. § We have our trimmed our 2H02 license and EPS estimates in line with management guidance and Street consensus. However, considering the outperformance in F1Q, our FY02 revenue and EPS estimates remain unchanged at $405M/$0.69. FY03 estimates are unchanged at $490M/$0.95. § Mercury's shares (at $33 after-hours) trade at 34x our FY03 EPS estimate. While not dirt-cheap valuation, we believe the company has significant earnings leverage in an economic recovery and thus Street estimates could be conservative. Reiterate our Buy rating.

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