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Getting delisted by a major exchange is probably about as much fun as sitting through a double root canal. But like dental work, delisting isn't fatal.


Mercury Interactive


, which was bumped off the


Jan. 4 amidst a nasty scandal and consigned to the ignominious realm of the Pink Sheets.

Shares of the Mountain View, Calif., software maker ended their last day in the big leagues trading at $27.88. And you'd expect those shares, which lost nearly 40% of their value in 2005, to keep on sinking. But that hasn't happened.

Mercury closed at $35.01 Thursday, a gain of about 24% since the delisting.

One person who wasn't surprised: IDC analyst Stephen Elliot, who has been following Mercury and systems management software makers for more than a decade. "Wall Street has not taken into account the resilient culture of this company, or talked to enough customers," he says.

Elliot, who says he talks to customers all the time, believes Mercury has built a deep well of customer loyalty. "It's extraordinary," he says.

Of course, Mercury's software, which helps test, develop and optimize applications, is so complex that many customers would do anything to avoid the pain of switching, even if three of the company's top executives were forced to resign in disgrace and two quarters of financial filings are overdue.

Mercury is restating financial results after a special board committee found that several executives benefited from a program to favorably price options grants. CEO Amnon Landan, CFO Douglas Smith and general counsel Susan Skaer

resigned after the findings.

Mercury subsequently missed a deadline to restate quarters that may have been affected by the options issue and was delisted, and just as significantly, removed as a component of the

S&P 500

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The company's troubles were well known before Nasdaq gave it the boot, but it still managed to close 25 deals greater than $1 million in the fourth quarter, compared with 24 such wins a year ago.

In a preliminary release of fourth-quarter financials this week, the company also lowered its full-year revenue growth estimate to a range of 22% to 24% from its previous guidance of 23% to 27%. But that didn't stop investors from giving the stock a better than 8% bump after the news got around.

Piper Jaffray analyst David Rudow, who admits to being somewhat surprised at the stock's resilience, said the big deals are an indication that Mercury "is doing a very good job managing its existing customer base. We feel the installed base provides the company with a nice core foundation and stable maintenance revenue stream."

He added, however, that new customers may be a bit skeptical. One reason: There's still speculation that Mercury could be a takeover target, which would be the best possible news for investors but a source of anxiety for customers. Piper Jaffray does not have a current investment banking relationship with Mercury.

Computer Associates

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would have been one of the most logical acquirers, but its

recent agreement to buy Wily Technology, a Mercury competitor, rules it out. Even so, other potential predators mentioned on Wall Street included


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BEA Systems



Goldman Sachs analyst Laura Conigliaro upgraded Mercury to in-line Wednesday, saying there is "increased confidence that the company is turning the corner on its current internal issues." Goldman Sachs has an investment banking relationship with Mercury.

Interestingly, a study by Goldman's relative value team indicates that delisting is a pain -- but one stocks tend to get over. As Conigliaro summed it up:

"Their study found that stocks going through delisting tend to drop a median of 10% on the day of delisting announcement and another 4% on the actual delisting date. After the delisting, however, stocks tend to outperform -- for example, up a median of 7% in the subsequent 10 days, 10% in the subsequent 30 days, and 18% in the subsequent 90 days relative to the market (S&P 500)."

Is That a Microprocessor in your Pocket?

Like nearby San Francisco's down-at-the-heels public transit system, delay tends to be the norm for product launches in Silicon Valley. But the Valley's newest power couple --


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-- confounded expectations by bringing in Intel-powered Macs and notebooks not on time but months ahead of schedule.

The faster-than-expected launch does more for the partners than give them bragging rights, though there's plenty of that going on. Apple won't have to worry about the infamous Osborne effect, in which customers stop buying in anticipation of something newer and cooler arriving in the near future.

It also ensures that Apple is at least neck and neck with traditional vendors of Windows machines which debuted PCs powered with the same Intel chip, the Core Duo, at the Computer Electronics Show in Las Vegas.

Even more significant, though, is that Apple gains the advantages of using commodity parts, like the Duo Core and related chipsets, while its machines continue to run the company's proprietary operating systems, says Nathan Brookwood, principal analyst at Insight64. "Apple did something incredibly clever by putting a wall of differentiation between its stuff while still using commodity parts," he says.

Apple, by the way, won't be participating in Intel's comarketing programs (no Intel sticker on those Macs), and that means it loses out on big ad subsidies from Intel. Or does it? Maybe not, says Brookwood, who speculates that Apple is getting back some or all of the lost marketing funds by negotiating favorable chip prices with Intel.