EXHIBIT 99.1

Investor Relations Contact

Anne Marie McCauley, 408-822-5359

Public Relations Contact

Dave Peterson, 408-822-5231

MERCURY INTERACTIVE REPORTS RECORD REVENUE OF $126 MILLION

· Net Increase in Deferred Revenue: $32.1 million

· Earnings Per Share: $(0.08) GAAP; $0.23 Non-GAAP

SUNNYVALE, CALIF. — OCTOBER 22, 2003 — Mercury Interactive Corporation (NASDAQ: MERQ), the global leader in business technology optimization (BTO), today reported results for the third quarter ended September 30, 2003.

Revenue for the third quarter of 2003 was $126.1 million, an increase of 29 percent compared to $97.9 million reported in the third quarter of 2002. Revenue for the first nine months of 2003 was $354.5 million, an increase of 26 percent compared to $282.4 million for the same period in 2002.

Deferred revenue for the third quarter of 2003 increased by $32.1 million from the second quarter of 2003 to $226.0 million. Cash generated from operations for the third quarter of 2003 was $22.2 million compared to $28.0 million in the third quarter of 2002. Net cash generated from operations in the third quarter of 2003 was reduced by $8.0 million of prepaid royalties for the previously announced license of technology from Motive Communications, Inc.

GAAP Results

Net loss for the third quarter of 2003 was $6.7 million, or $0.08 per basic share, compared to a profit of $13.3 million, or $0.15 per diluted share, for the same period a year ago. GAAP results for the third quarter include acquisition related charges of $12.7 million, or $0.13 per diluted share, related to the completion of the Kintana acquisition, as well as $16.9 million, or $0.18 per diluted share, of non-cash impairment charges relating to real-estate consolidation. Net income for the first nine months of 2003 was $28.4 million, or $0.31 per diluted share, compared to $46.5 million, or $0.53 per diluted share, for the same period a year ago.

Non-GAAP Results

Net income for the third quarter of 2003 was $21.3 million, or $0.23 per diluted share, compared to $14.2 million, or $0.16 per diluted share, for the same period a year ago. Non-GAAP earnings per share

1

is calculated using fully diluted shares of 94.0 million. Net income for the first nine months of 2003 was $60.0 million, or $0.66 per diluted share, compared to $39.6 million, or $0.45 per diluted share, for the same period a year ago. Non-GAAP results, as presented in the attached reconciliation table, exclude the following recurring items: expenses from acquisition and restructuring related charges, asset impairment charges related to real estate, gain on early retirement of debt, stock-based compensation and amortization of intangible assets, as well as related income tax provisions or benefits.

On August 15, 2003, Mercury completed its previously announced acquisition of Kintana, Inc. for approximately $225.0 million in cash and stock. GAAP financial results for the quarter include an in-process R&D write-off and acquisition related expenses totaling $12.7 million. In connection with the acquisition of Kintana, and to optimize the work environment for employees and customers, the company intends to move to a new headquarters campus in Mountain View, CA. Accordingly, third quarter GAAP results also include a non-cash charge of $16.9 million to reflect the impairment of a portion of the existing Sunnyvale facilities.

“In the third quarter Mercury had record revenues, strong deferred revenues, and a record number of large transactions, reflecting the adoption of Business Technology Optimization by our customers.” said Amnon Landan, chairman, CEO and president of Mercury Interactive Corporation.

Q3 2003 Highlights

· Acceleration of business model with term licenses representing a record 46 percent of new product orders

· Strong net increase in deferred revenue of $32.1 million, generated principally from term licenses

· Record of eight transactions over $1 million

· Record application management results in both new orders and revenue

· Largest technology launch in Mercury’s history:BTO Technology Blueprint and Mercury Optimization Centers

2

FINANCIAL OUTLOOK

The following financial outlook is provided based on information as of October 22, 2003.

Management initiates the following guidance for the quarter ending December 31, 2003:

· Term licenses are expected to be in the range of 43 percent to 47 percent of new product orders

· Revenue is expected to be in the range of $140.0 million to $148.0 million

· Net increase in deferred revenue is expected to be in the range of $35.0 million to $45.0 million

· GAAP diluted earnings per share is expected to be in the range of $0.18 to $0.22

· Non-GAAP diluted earnings per share is expected to be in the range of $0.23 to $0.27

· Cash flow from operations is expected to be in the range of $40.0 million to $55.0 million

Non-GAAP guidance is adjusted from GAAP guidance by excluding recurring acquisition and restructuring related charges and stock-based compensation and amortization of intangible assets of approximately $5.0 million.

MANAGEMENT CHANGE

Chief Operating Officer Ken Klein is leaving the company at the end of the year to pursue outside interests. “Ken helped to build Mercury from a startup to a leading enterprise software company,” said Amnon Landan, chairman, CEO and president of Mercury Interactive Corporation. “I’d like to thank Ken for twelve years of great service and wish him success in his new endeavors.”

QUARTERLY CONFERENCE CALL

Mercury Interactive will host a conference call to discuss third quarter results at 2:00 p.m. Pacific Daylight Time today. A live Webcast of the conference call, together with supplemental financial information, can be accessed through the company’s Investor Relations Web site at http://www.mercuryinteractive.com/ir. In addition, an archive of the Webcast can be accessed through the same link. An audio replay of the call will be available until midnight on October 28, 2003. The audio replay can be accessed by calling 888-203-1112 or 719-457-0820, conference call code: 778907.

3

ABOUT MERCURY INTERACTIVE

Mercury Interactive, the global leader in business technology optimization (BTO), is committed to helping customers optimize the business value of information technology. Founded in 1989, Mercury Interactive conducts business worldwide and is one of the fastest growing enterprise software companies today. Mercury Interactive provides software and services to govern the priorities, people and practices of IT; deliver and manage applications; and integrate IT strategy and execution.

Customers worldwide rely on Mercury Interactive offerings to improve quality and performance of applications and manage IT costs, risk and compliance. Mercury Interactive BTO offerings are complemented by technologies and services from global business partners. For more information, visit www.mercuryinteractive.com.

FORWARD LOOKING STATEMENTS

This press release contains “forward-looking statements” under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties concerning Mercury Interactive’s expected financial performance, as well Mercury Interactive’s future business prospects and product and service offerings. Mercury Interactive’s actual results may differ materially from the results predicted or from any other forward-looking statements made by, or on behalf of, Mercury Interactive and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among other things: 1) the mix of perpetual and term licenses and the effect of the timing of the recognition of revenue from products sold under term licenses; 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 success of its BTO strategy; 4) uncertainties related to the integration of Kintana’s products and services, employees and operations; 5) the ability to attract and retain key personnel; 6) intense competition for Mercury Interactive’s products and services; and 7) 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, 2002 and the Form 10-Q for the quarter ended June 30, 2003, which are available at the SEC’s website at www.sec.gov. Additional information will also be set forth in Mercury Interactive’s Quarterly Report on Form 10-Q for the three month period ended September 30, 2003, which will be filed with the SEC in

4

the fourth quarter of 2003. All of the information in this press release is as of October 22, 2003, and Mercury Interactive undertakes no duty to update this information.

NON-GAAP FINANCIAL INFORMATION

Mercury Interactive provides non-GAAP net income and earnings per share data as additional information for its operating results. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. Mercury Interactive’s management believes these non-GAAP measures are useful to investors because this supplemental information facilitates comparisons to prior periods. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which is attached to this press release.

# # #

Editor’s Note

Tables Attached: Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows, Table of Reconciliations from GAAP to Non-GAAP.

Mercury Interactive and Kintana are trademarks or registered trademarks of Mercury Interactive Corporation or its subsidiaries in the United States and/or other countries. Other 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

5

MERCURY INTERACTIVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three months ended September 30,					Nine months ended September 30,
	2003			2002		2003		2002
Revenues:
License fees	$	47,208		$	44,055	$	139,998	$	133,639
Subscription fees		26,601			14,062		68,362		37,678
Total product revenues		73,809			58,117		208,360		171,317
Maintenance fees		41,210			31,671		115,540		88,601
Professional service fees		11,037			8,064		30,597		22,434
Total revenues		126,056			97,852		354,497		282,352
Costs and expenses:
Cost of license and subscription		7,669			5,734		20,976		18,630
Cost of maintenance		3,086			2,909		8,594		8,629
Cost of professional services		9,940			7,104		24,020		16,929
Marketing and selling		57,431			48,201		165,922		140,166
Research and development		14,459			10,395		39,168		31,315
General and administrative		9,818			7,390		28,640		22,782
Stock-based compensation		299			251		683		918
Acquisition related charges		10,688			—		11,968		(537	)
Restructuring, integration and other related charges		1,380			—		2,297		—
Amortization of intangible assets		2,367			639		3,524		1,917
Facilities impairment		16,882			—		16,882		—
Total costs and expenses		134,019			82,623		322,674		240,749
Income (loss) from operations		(7,963	)		15,229		31,823		41,603
Other income, net		2,955			1,582		7,723		17,169
Income (loss) before provision for income taxes		(5,008	)		16,811		39,546		58,772
Provision for income taxes		1,656			3,540		11,131		12,321
Net income (loss)	$	(6,664	)	$	13,271	$	28,415	$	46,451
Net income (loss) per share (basic)	$	(0.08	)	$	0.16	$	0.33	$	0.55
Net income (loss) per share (diluted)	$	(0.08	)	$	0.15	$	0.31	$	0.53
Weighted average common shares (basic)		87,705			84,187		86,125		83,732
Weighted average common shares and equivalents (diluted)		87,705			87,076		91,320		87,670

6

MERCURY INTERACTIVE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)  

(unaudited)

	September 30, 2003			December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents	$	621,400		$	349,123
Short-term investments		151,645			178,123
Trade accounts receivable, net		114,527			93,095
Deferred tax assets		24,986			9,858
Prepaid expenses and other assets		51,599			36,690
Total current assets		964,157			666,889
Long-term investments		385,940			137,954
Property and equipment, net		75,425			88,516
Investments in non-consolidated companies		15,797			15,952
Debt issuance costs, net		15,822			6,037
Goodwill		349,196			113,327
Intangible assets, net		47,939			2,548
Restricted cash		6,000			6,000
Interest rate swap		15,329			17,378
Long–term deferred tax asset		11,213			—
Other assets		17,448			21,133
Total assets	$	1,904,266		$	1,075,734
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16,082		$	12,292
Accrued liabilities		83,264			71,414
Deferred tax liabilities		5,789			451
Income taxes payable		86,076			70,051
Short-term deferred revenue		173,095			135,338
Total current liabilities		364,306			289,546
Convertible notes		814,887			316,972
Long–term deferred tax liabilities		12,778			—
Long-term deferred revenue		52,932			24,048
Total liabilities		1,244,903			630,566
Stockholders’ equity:
Common stock		179			169
Additional paid-in capital		437,442			254,218
Treasury stock		(16,082	)		(16,082	)
Notes receivable from issuance of common stock		(7,049	)		(11,055	)
Unearned stock-based compensation		(1,837	)		(1,296	)
Accumulated other comprehensive loss		(2,644	)		(1,725	)
Retained earnings		249,354			220,939
Total stockholders’ equity		659,363			445,168
Total liabilities and stockholders’ equity	$	1,904,266		$	1,075,734

7

MERCURY INTERACTIVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
Cash flows from operating activities:
Net income (loss)	$	(6,664	)	$	13,271		$	28,415		$	46,451
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		4,384			3,930			12,527			11,606
Sales reserve		1,596			1,723			360			2,017
Unrealized (gain) loss on interest rate swap		56			(386	)		(36	)		(386	)
Amortization of intangible assets		2,367			639			3,524			1,917
Stock-based compensation		299			251			683			918
Gain on early retirement of debt		—			—			—			(11,610	)
Unrealized gain on warrants		(237	)		—			(237	)		—
Loss on investments in non-consolidated companies		177			—			1,516			411
Write-off of in-process research and development		10,688			—			11,968			—
Facilities impairment		16,882			—			16,882			—
Deferred income taxes		(11,246	)		—			(10,170	)		—
Changes in assets and liabilities:
Trade accounts receivable		(27,842	)		(6,095	)		(14,685	)		1,402
Prepaid expenses and other assets		(9,036	)		3,166			(11,594	)		(4,539	)
Accounts payable		(2,382	)		(247	)		(2,690	)		207
Accrued liabilities		(1,744	)		(5,428	)		(696	)		(1,204	)
Income taxes payable		13,888			3,213			15,949			10,846
Deferred revenue		31,055			13,917			61,938			32,906
Net cash provided by operating activities		22,241			27,954			113,654			90,942
Cash flows from investing activities:
Maturities of investments		323,944			189,339			1,504,112			305,868
Purchases of investments		(439,904	)		(30,049	)		(1,725,260	)		(244,063	)
Restricted cash		—			—			—			(6,000	)
Purchases of investments in non-consolidated companies		(375	)		(744	)		(1,125	)		(2,244	)
Cash paid in conjunction with the acquisition of Performant, net		(93	)		—			(22,018	)		—
Cash paid in conjunction with the acquisition of Kintana, net		(131,392	)		—			(131,392	)		—
Cash paid in conjunction with a technology purchase of Allerez		(1,270	)		—			(1,270	)		—
Acquisition of property and equipment, net		(4,714	)		(2,682	)		(12,347	)		(6,461	)
Net cash provided by (used in) investing activities		(253,804	)		155,864			(389,300	)		47,100
Cash flows from financing activities:
Proceeds (costs) from issuance of convertible notes		(66	)		—			488,132			—
Issuance of common stock, net		31,871			5,404			55,404			19,651
Collection of notes receivable from issuance of common stock		1,309			—			3,755			873
Repayment of convertible notes		—			—			—			(64,640	)
Net cash provided by (used in) financing activities		33,114			5,404			547,291			(44,116	)
Effect of exchange rate changes on cash		(193	)		658			632			1,101
Net increase (decrease) in cash and cash equivalents		(198,642	)		189,880			272,277			95,027
Cash and cash equivalents at beginning of period		820,042			153,444			349,123			248,297
Cash and cash equivalents at end of period	$	621,400		$	343,324		$	621,400		$	343,324

8

MERCURY INTERACTIVE CORPORATION

TABLE OF RECONCILIATIONS FROM GAAP TO NON-GAAP

(in thousands, except per share data)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
GAAP Net Income to Non-GAAP Net Income:
GAAP net income (loss)	$	(6,664	)	$	13,271		$	28,415		$	46,451
In-process research and development (Performant)		—			—			1,280			—
In-process research and development (Kintana)		10,688			—			10,688			—
Bonus program (Performant)		981			—			1,898			—
Gain on reversal of restructuring charge		—			—			—			(537	)
Integration costs (Kintana)		399			—			399			—
Facilities impairment		16,882			—			16,882			—
Stock-based compensation and amortization of intangible assets (Freshwater)		571			890			1,853			2,835
Stock-based compensation and amortization of intangible assets (Performant)		326			—			585			—
Stock-based compensation and amortization of intangible assets (Kintana)		1,658			—			1,658			—
Stock-based compensation and amortization of intangible assets (other)		111			—			111			—
Gain on early retirement of debt		—			—			—			(11,610	)
(Provision) benefit for income taxes		(3,666	)		—			(3,849	)		2,429
Non-GAAP Net Income	$	21,286		$	14,161		$	59,920		$	39,568
GAAP Diluted EPS to Non-GAAP Diluted EPS:
GAAP net income (loss) per share-diluted	$	(0.08	)(3)	$	0.15		$	0.31		$	0.53
In-process research and development (Performant)		—			—			0.01			—
In-process research and development (Kintana)		0.11			—			0.12			—
Bonus program (Performant)		0.01			—			0.02			—
Gain on reversal of restructuring charge		—			—			—			(0.01	)
Integration costs (Kintana)		—	(1)		—			—	(1)		—
Facilities impairment		0.18			—			0.18			—
Stock-based compensation and amortization of intangible assets (Freshwater)		0.01			0.01			0.02			0.03
Stock-based compensation and amortization of intangible assets (Performant)		—	(1)		—			0.01			—
Stock-based compensation and amortization of intangible assets (Kintana)		0.02			—			0.02			—
Stock-based compensation and amortization of intangible assets (other)		—	(1)		—			—	(1)		—
Gain on early retirement of debt		—			—			—			(0.13	)
(Provision) benefit for income taxes		(0.04	)		—			(0.04	)		0.03
Non-GAAP net income per share-diluted	$	0.23	(2),(4)	$	0.16		$	0.66	(2)	$	0.45
(1) Amount is less than $0.005
(2) Amounts do not foot due to rounding
(3) Weighted average shares (basic) used in calculation is 87,705
(4) Weighted average shares (diluted) used in calucation is 94,042
GAAP Operating Margin to Non-GAAP Operating Margin:
GAAP operating margin		(6.3	)%		15.6	%		9.0	%		14.7	%
In-process research and development (Performant)		—			—			0.4	%		—
In-process research and development (Kintana)		8.5	%		—			3.0	%		—
Bonus program (Performant )		0.8	%		—			0.5	%		—
Gain on reversal of restructuring charge		—			—			—			(0.2	)%
Integration costs (Kintana)		0.3	%		—			0.1	%		—
Facilities impairment		13.4	%		—			4.8	%		—
Stock-based compensation and amortization of intangible assets (Freshwater)		0.5	%		0.9	%		0.5	%		1.0	%
Stock-based compensation and amortization of intangible assets (Performant)		0.3	%		—			0.2	%		—
Stock-based compensation and amortization of intangible assets (Kintana)		1.3	%		—			0.5	%		—
Stock-based compensation and amortization of intangible assets-other		0.1	%		—			—			—
Non-GAAP operating margin		18.8	%(2)		16.5	%		18.9	%(2)		15.5	%
(2) Amounts do not foot due to rounding

9