MERCURY INTERACTIVE REPORTS THIRD QUARTER RESULTS

Revenue for the third quarter of 2002 was $97.9 million, an increase of 16 percent over the $84.0 million reported in the third quarter of 2001. Pro forma net income for the third quarter of 2002, which excludes amortization of goodwill and other intangible assets and amortization of unearned stock-based compensation, was $14.2 million. This represents an increase of 44 percent compared to pro forma net income of $9.8 million in the third quarter of 2001. Pro forma diluted earnings per share were $0.16, up 45 percent from $0.11 per share for the third quarter of 2001.

For the nine months ended September 30, 2002, revenue was $282.4 million, an increase of four percent over the $270.7 million for the same period in 2001. Pro forma net income in this period was $39.6 million, a decrease of six percent compared to $42.1 million for the same period in 2001.  Pro forma diluted earnings per share were $0.45, down four percent from $0.47 per share for the same period in 2001.

For the third quarter of 2002, net income was $13.3 million or $0.15 per share on a diluted basis. This includes amortization of $0.9 million associated with the Freshwater Software acquisition. Net income for the nine months ended September 30, 2002 was $46.5 million or $0.52 diluted earnings per share.

Cash generated from operations for the third quarter of 2002 was $28.0 million compared to $7.7 million in the third quarter of 2001. "Mercury Interactive’s strong third quarter performance is a result of our ability to address customers’ needs and the new IT reality," said Amnon Landan, chairman, CEO and president of Mercury Interactive Corporation. "Our Business Technology Optimization (BTO) solutions enable our customers to optimize the quality of their applications and infrastructure, eliminate technology waste and better align IT with the business."

Mercury Interactive will host a conference call today at 2:00pm Pacific Time to discuss third quarter results. Information regarding the conference call and webcast is available at www.mercuryinteractive.com/company/ir.

ABOUT MERCURY INTERACTIVE
Mercury Interactive, the global leader in business technology optimization (BTO), delivers Optane(tm), a suite of integrated products for enterprise testing, production tuning and performance management, that enables customers to optimize business processes and maximize business results. Customers worldwide - including 75% of the Fortune 500
- use Mercury Interactive solutions across their application and technology infrastructures to continuously measure, maximize and manage performance at every level of the business process and each stage of the application lifecycle to improve quality, reduce costs, and align IT with business goals. Founded in 1989, Mercury Interactive is headquartered in Sunnyvale, California, with offices in more than 25 countries. Further information is available at www.mercuryinteractive.com or by phone at U.S.
+1.408.822.5200. The company's common stock trades on the Nasdaq
National Market under the symbol MERQ.

The statements concerning Mercury Interactive's future business prospects and product and service offerings contained in this press release are "forward-looking statements" under the Private Securities Litigation Reform Act of 1995.  Numerous important factors affect Mercury Interactive’s operating results and could cause Mercury Interactive’s actual results to differ materially from forecasts and estimates or from any other forward-looking statements made by, or on behalf of, Mercury Interactive.  These factors include, but are not limited to, the following: 1) the effect of continued weak economic factors on the overall demand for software and services which could result in decreased revenues or lower revenue growth rates and increased uncertainty as to our expected revenues in future periods; 2) Mercury Interactive has historically received a substantial portion of its orders at the end of the quarter and if an order shortfall occurs at the end of a quarter it could negatively impact the company’s operating results for that quarter; 3) the dependence of Mercury Interactive's financial growth on the continued success and acceptance of its existing and new software products and services and the ability to increase international sales; 4) intense competition for Mercury Interactive's products and services; and 5) the additional risks and important factors described in Mercury Interactive's SEC reports, including the Annual Report to Stockholders on Form 10-K for the fiscal year ended December 31, 2001 and other filings with the SEC. # # #