H-P Recruits Alcatel for Cisco War

(Updates share prices throughout)

Hewlett-Packard(HPQ Quote) has raised the stakes in its battle with networking giant Cisco(CSCO Quote) by forging a 10-year global alliance with telecom equipment maker Alcatel-Lucent(ALU Quote).

Cisco sent shockwaves through the tech sector when it entered the server market with its Unified Computing System (UCS) earlier this year, effectively stepping on the toes of its long-standing partners IBM(IBM Quote) and H-P.

The move prompted belligerent noises from H-P, which retaliated with the launch of its BladeSystem Matrix. H-P has also ramped up its efforts around its own ProCurve networking gear.

Palo Alto, Calif.-based H-P will now jointly market its products with Alcatel's in a deal claimed to be worth billions of dollars between now and 2019. Alcatel's offerings in areas such as IP telephony, security and call centers will also be integrated with H-P's technology.

Shares of Alcatel gained 5 cents, or 1.9%, to $2.65 in Thursday trading. H-P rose 13 cents, or 0.4%, to $37.55, as the Nasdaq dipped 0.02%.

At least one analyst thinks that the partnership is a shrewd move, particularly at a time when companies are looking to deliver more and more services via Internet.

"This is positive for Alcatel-Lucent and H-P because, as business migrates to 'cloud computing,' they will demand high quality services and secure networks," wrote Avi Cohen, managing partner at analyst firm Avian Securities, in a note released Thursday. "Alcatel-Lucent can support cloud computing efforts of the carriers with a stronger tie to H-P and, likewise, H-P will be able to support Alcatel-Lucent with its vast enterprise channel."