After its competition Rational Software (Nasdaq:RATL) reported better than forecast results last week, Mercury Interactive (Nasdaq:MERQ) today did the same. The company reports revenues of $90.3 million, higher than the forecast $87 million, but lower than the $97.5 million in the same quarter last year.

Net profit pro forma, deducting goodwill amortization and one-time profits, came to $12.1 million or 14 cents per share. In the same item last year the company reported net profit of $25.8 million or 28 cents per share.

Net profit totaled $15.8 million or 18 cents per share, and included the $12.8 million amortization on the Freshwater acquisition, and a gain due to early debt retirement of $16.3 million.

At the end of the quarter there was $427.7 million in the till, down from $628.7 million at the beginning of the year. The top line of the company's gain/loss report improved, as revenues totaled $361 million compared to $307 million in 2000. Pro forma net profit dropped to $54.3 million, or 60 cents a share from $64.7 million or 70 cents per share in 2000. Net profit in 2001 came to $34.2 million or 38 cents per share.

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Following the release of Rational's finanacial results last week, UBS Warburg estimated the software market has stabilized and gradual improvement will become evident in mid 2000. The bank also estimated Mercury is the leader of the software testing market with a market share of 51%, followed by Rational with a 20% market share. It was also estimated Mercury was well situated to continue leading the market, and win additional segments in the next year or two.

Mercury's share has gained 103% since the beginning of the year, and according to analysts Jonathan Half and Jordan Klein it is traded at a premium 17% higher than its comparable group, indicative of its status.

The bank is predicting Mercury will continue to climb as large organizations increase their acquisition budgets in the second half of 2002. The bank therefore forecasts annual revenues of $383 million for Mercury.