Mercury Interactive

(MERQ)

grew first-quarter net income by 66% and revenue by 27%, a modestly better performance than Wall Street had expected.

But guidance for the current quarter straddled analysts' estimates, and hard-to-please tech investors knocked the stock down by 3% in after-hours trading Wednesday evening.

The company earned $31.4 million, or 32 cents a share, in the quarter, compared with $18.9 million, or 18 cents a share, in the same quarter last year. Revenue for the March quarter was $198.8 million.

Excluding items, Mercury earned 34 cents a share. Analysts polled by Thomson First Call had projected a profit of 32 cents on sales of $197.61 million.

Deferred cash, which reflects money that will be recognized ratably, increased by $2.6 million from the fourth quarter to $417 million. And cash generated from operations was $72.1 million, compared to $62 million in the first quarter of 2004.

Mercury sells software that helps companies test, manage and integrate business applications.

Looking at the second quarter, non-GAAP diluted earnings per share will likely be in the range of 33 cents to 37 cents, on revenue of $205 million to $215 million. Analysts had forecast a 35-cent profit on sales of $210.25 million.

Shares of Mercury lost $1.31 to $42 in after-hours trading Wednesday.