MERCURY INTERACTIVE REPORTS SECOND QUARTER RESULTS

Revenue for the second quarter of 2002 was $94.0 million, compared to $96.0 million in the second quarter of 2001. On a pro forma basis, net income for the second quarter of 2002, excluding non-operating items, was $13.3 million or $0.15 per share on a diluted basis, compared to net income of $16.2 million or $0.18 per share on a diluted basis for the second quarter of 2001.

For the six months ended June 30, 2002, revenue was $184.5 million compared to $186.7 million for the same period in 2001. On a pro forma basis, net income in this period was $25.4 million or $0.28 per share on a diluted basis, compared to net income of $32.3 million or $0.35 per share on a diluted basis for the same period in 2001.

“Mercury Interactive’s strong second quarter results underscore the importance companies place on the quality, reliability and performance of their applications and infrastructure,” said Amnon Landan, chairman, CEO and president of Mercury Interactive. “Our testing, tuning and performance management solutions help IT professionals optimize the return from their technology investments, mitigate risk and minimize capital and operational expenses as they deliver solutions to achieve their business goals.”

For the second quarter of 2002, net income was $18.0 million or $0.20 per share on a diluted basis. This includes amortization of $0.9 million associated with the Freshwater Software acquisition and a gain of $4.6 million, net of $2.4 million of taxes, associated with the early retirement of debt. Net income for the six months ended June 30, 2002 was $33.2 million or $0.37 diluted earnings per share.

For the first time Mercury Interactive has included a statement of cash flows with the attached financial tables. Cash generated from operations for the second quarter of 2002 was $35.5 million compared to $30.3 million in the second quarter of 2001.

During the second quarter, Mercury Interactive paid approximately $41.0 million, including accrued interest, to retire $47.7 million face amount of its convertible subordinated notes. This brings the total face amount of convertible subordinated notes retired to $200.0 million. Mercury Interactive will host a conference call today at 2:00pm Pacific Time to discuss second quarter results. Information regarding the conference call and webcast is available at www.mercuryinteractive.com/company/ir.

ABOUT MERCURY INTERACTIVE
Mercury Interactive (www.mercuryinteractive.com) delivers a complete, integrated family of enterprise testing, production tuning and performance management solutions that enable customers tooptimize business processes and maximize business results. Customers worldwide use Mercury Interactive solutions across their application and technology infrastructures to measure, optimize and manage at every level of the business process and each stage of the application lifecycle to ensure key business objectives are met or exceeded. Mercury Interactive is headquartered in Sunnyvale, California, with offices in more than 25 countries. 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. # # #

Editor’s Note
Tables Attached: Pro Forma Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows

Mercury Interactive is a registered trademark. Freshwater Software is a registered trademark of our wholly owned subsidiary, Freshwater Software, Inc. Product and company names are used herein for identification purposes only, and may be trademarks of their respective companies. MERCURY INTERACTIVE 1325 Borregas Avenue, Sunnyvale, CA 94089 Tel: (408) 822-5200 Fax: (408) 822-5300