MENLO PARK, Calif. (CNN/Money) - In the business of selling high-priced software to businesses, it seems that success comes only with a confusing alphabet-soup category name.

SAP (SAP: Research, Estimates) got huge selling ERP, or enterprise-wide resource planning software. Siebel Systems (SEBL: Research, Estimates) passed a billion dollars in sales pumping CRM, or customer-relationship management software (think: databases for salespeople and customer-service centers).

Now comes the next wanna-be software bigshot in a wanna-be category with a horrible name: Mercury Interactive (MERQ: Research, Estimates) hawking BTO, for business technology optimization.

If Mercury is right about BTO -- and the $4-billion market cap company has been right about a lot in its relatively short 14 years of existence -- then it certainly could be among the biggest software companies around.

Its stated goal is be to be No. 5 among software-only companies, smaller only than Microsoft, Oracle, SAP and Computer Associates.

Some background is in order. And I got it recently from Christopher Lochhead, the relatively new head of marketing for Mercury. The company started life in the late 1980s as a project of a bunch of Israeli software engineers out to solve a problem.

Buyers of software typically don't know if the stuff is going to work before they install it, unlike, say, purchasers of steel beams. So the Mercury team developed programs to test software before it's installed, a time and money saver for corporate IT shops.

Then it moved on to software that helps manage lots of different programs once they've been installed. In Lochhead's words, "So you have all this stuff. How are you going to make it work?"

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These two thrusts helped make Mercury -- which aims to drop the awful and inaccurate "Interactive" from its name sooner rather than later -- a highly profitable $400 million-revenue company in 2002.

Now Mercury is onto its third corporate leg, the one that's helping it grow into being a player in BTO -- assuming anyone can ever get used to thinking of that label as a software category instead of a rock band whose biggest hit, ironically, was "Taking Care of Business."

The new leg is called "IT governance," and it's a series of software programs that help the IT department track, measure, analyze and make decisions about all the various technologies running within the company.

Lochhead says BTO will be to the chief information officer what ERP was for the chief financial officer and CRM was for the head of sales.

It's a compelling notion, which is why Mercury is so expensive. Its market value is roughly 10 times trailing sales, a nosebleed valuation.

Its success also has attracted competition. IBM, Computer Associates, HP, BMC and Veritas are just a few of the companies going up against Mercury in its various product lines.

Still, investors are bullish. On a day when Oracle disappointed (see below), Mercury's stock was up.

Even at $48, there's a built-in bogey for Mercury investors to feel good about. In April it sold $500 million worth of zero-coupon, no-interest bonds. The conversion price is $51.69.

This means the only way those bond holders make money is if Mercury's stock goes up another two and half dollars.

Meantime, Mercury is using that cash for a string of acquisitions. Because it wants to get really big. After all, it's got some initials to grow into.

I suggested a too-rosy scenario here the other day regarding Oracle's first-quarter results. Instead of growing in the low single digits, Oracle reported an embarrassing decline in year-over-year license revenue sales. It also disclosed it spent an astounding $21 million on its campaign to acquire PeopleSoft (PSFT: Research, Estimates).

Patrick Walravens, the analyst I quoted bulling Oracle's (ORCL: Research, Estimates) shares, still likes the company's prospects and advocates buying on the dip. Interestingly, investors did just that on Friday.

Oracle's shares opened at $12.14, a drop of 6.5 percent from Thursday's close. They proceeded to rise steadily throughout the day, ending at $12.53, a somewhat less severe decline of 3.5 percent.

Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.

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