(Updates share prices throughout)Hewlett-Packard ( HPQ) has raised the stakes in its battle with networking giant Cisco ( CSCO) by forging a 10-year global alliance with telecom equipment maker Alcatel-Lucent ( ALU). 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) 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."
Cisco forged its own technology integration deal with Alcatel way back in 1997, although Cohen feels that H-P's move could spell bad news for the networking giant. "This is another effort from H-P to establish footprint within Cisco's customer base, such as the carriers, and aggressively pursue a new market opportunity for the carriers," he wrote. There has even been speculation that hardware giant IBM may join forces with Cisco's networking rival Juniper ( JNPR). For IBM, a deal to sell Juniper networking gear would mark a further step away from its one-time buddy Cisco and could boost its data center revenue. Networking giant 3Com ( COMS) has also cranked up the pressure on Cisco, recently expanding its Chinese H3C subsidiary into the rest of the world. Even switch maker Voltaire ( VOLT) is getting in on the act, overhauling its product strategy in the wake of Cisco's entry into the server market. In its recent fiscal third quarter, Cisco saw its sales slip more than $1.5 billion compared to the prior year, although the firm remains the dominant force in networking and foresees new opportunities in areas such as home entertainment. Cisco shares fell 21 cents, or 1.1%, to $18.99 Thursday.