MERQ..another successful Israeli Offering.. It does correct on occasion as you can see if you zoom into the chart...http://biz.yahoo.com/prnews/991122/ca_mercury_1.html Its been resting on 84 support since last Friday after falling from 98.. Its having a little trouble as it dropped down from 85 which was support. 90 seems to be resistance. stochastics are oversold (a rare event) and RSI is still nicely bullish. marketgems.com
I usually get out near the bull flag corrections and I am now out of a longer term hold but will reenter as MERQ bounces off support. This is not a pump and dump stock or a 'potential' but a tried & true winner that has been an earnings play for 4 consecutive seasons. It has enough intraday range to be a trading stock although its more of a 'core holding'..
Up to this year, MI was identified mostly with ERP marketing, testing client-server systems, testing Y2000 adaptation projects, and the Euro currency. In the wake of its decision to enter the Internet field, MI is increasingly identified with the e-commerce market, which includes the commercial Internet site market.
MI currently has 525 employees, its management is located in Silicon Valley, and its main development and maintenance center is in Or Yehuda. Landan, who was apponted MI chairman three months after the resignation of founder Arie Feingold, is also in California.
MI was founded in 1989; the company's 1998 sales amounted to $121 million. The strategic decision to enter Internet led MI to develop completely new tools for testing Internet sites before they are activated. The change in direction has proved itself: within less than half a year, the company's shares rose in value and the company value increased from $1 billion six months ago to $2.7 billion this month. This finds expression in the bottom line: the company finished Q2 with $47.5 million sales, a jump of 55% over the corresponding quarter in 1998. The Internet gamble paid off. At the same time, MI customer profile underwent a dramatic change. At the beginning of the year only 20% of MI's customers were Internet customers; the proportion this month was over 55%.
The company made another quantum leap this month, debuting its Topaz software package. Topaz also tests Internet sites and Internet-based applications, but the testing is not solely pre-operational. Topaz can test a site's functioning in real time, which makes it more than a testing tool - it is also a real time control system.
Topaz is aimed at e-commerce-based organizations, for whom Internet site function is no less than critical. The software facilitates testing the site under various artificial loads, system-bursting loads, various tasks, and even performs automatic sequential tests. In effect, a tool for testing becomes a monitoring tool enabling the site's operators to receive an almost continuous report of its functioning.
"It was clear to us that the next step was to find exactly where the problem is, and the main Internet problem is the network". Landan explains how MI decided to acquire Conduct. "We needed the capacity to monitor and analyze the network itself, which Conduct knows how to do on a packet level. Their technology has a "deep memory", which facilitates the collection of information about the network for a very long period from different sources, and the performing of comparisons and analyses of the accumulated information."
How did you decide on the acquisition?
"After we concluded that we needed a presence in networking, we began looking around. At the same time, Conduct worked with us on Topaz, so we knew them. We didn't know they were selling, but when they wanted to raise more money, the acquisition deal quickly got going. We gave 1% of our shares and got good technology.
"As of now, the two products, Topaz and Conduct, are separate, but are marketed as complementary products, i.e. as a package."
"Globes": Your are talking about e-commerce customers; what about you? Are you conducting e-commerce?
Landan: We are providing a lot of support time through the web. We already have 8,000 customers using our existing in-house developed site. Last week, we released two new customer support sites, which connect our service-providing customers with our service-receiving customers. The first creates a meeting between customers seeking expertise and consultants seeking customers. Today, most applications are becoming Internet-based, and consultants can also work from a place physically remote from the customers. The site is intended to support our ecosystems. We are concentrating on finding partners and are careful to leave them a share of the pie.
"The second site we developed allows customers to receive individually-tailored support. The customer receives expertise according to the tools in his possession. The site contains a mechanism to encourage the creation of a linear community using points, like frequent flier. When someone does 'something good', solving a problem by way of the site, rather than telephoning, for example, he gets points. If he contributes application notes to the community, he gets points. The site also has an electronic store, which facilitates trading in points and exchanging them for gifts."
A real Mercury community.
"We'll turn the sites into a community both attractive and useful to us, since we controll it. The sites will enable customers to get information from the company from our other customers. Much more important things are being done, but customers have less time. The rate at which they can learn is critical, so we are concentrating on mechanisms, whose purpose is to make communications more efficient. Customers have no time anymore."
The difference between a large customer and a small one has disappeared in the e-commerce era. What kind of customers do you have?
"As of now, most of our e-commerce customers engage in selling to end customers (Business-to-Customers). I expect the next wave to be companies engaging in inter-company business (Business-to-Business). Our assumption is that the B2B market is 15 times larger than the B2C.
"We are trying to achieve the capability of serving two kinds of customers: medium-sized organizations and Internet service providers. The market is composed of different types of customers, like the positioning of our products. That's why we brought out the Astra system. It enables the customer to start small and check only his web site. Astra is limited to 500 users and can be downloaded for free from the Internet with the Try and Buy program. We are likely to adopt this strategy in system management (Conduct) also."
In order to enter a higher field in the Internet food chain, however, that of the large Internet providers, and go from there to jump into the telecom market itself, with the multiplication of IP-based telecom infrastructures, MI needs cooperation with a really large player. For example, IBM. That's exactly MI's cooperation with IBM-owned Tivoli.
From this month, Tivoli will market a new software package, based on MI technology, for controlling operation of web sites of large organizations. The new package, Application Performance Manager, will be marketed to especially large organizations, with the Israeli company receiving royalties on each sale.
The Topaz product, by the way, is based on technology included in Tivoli's TAPM product, which also facilitates testing of site functioning in real time, not just before their operation. TAPM tests the sites from the user's perspective, reveals functional problems, such as delays is accessing pages, and tests the site's behaviour under various load conditions.
Amnon Landan has discovered an understanding between the two cooperating companies "also in the field", assisting each other in marketing and ensuring that the two products are compatible in the future. Among other things, cooperation is based on the assumption that MI's Topaz can serve as an easy entrance for customers to Tivoli's more comprehensive product. Where MI is concerned, it can serve equally as an entrance into the large organizations and large communications providers market, which MI is ogling at.
Published by Israel's Business Arena on November 2, 1999
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