French telecom equipment maker

Alcatel

(ALA)

, which reported strong

third-quarter earnings today, announced a deal designed to extend

360networks'

(TSIX)

global optical network.

TheStreet Recommends

Alcatel, whose shares were recently up $5.13, or 9%, to $62.25 in

New York Stock Exchange

trading, agreed to purchase up to $1 billion of 360networks convertible preferred stock due in 2012 in two parts. The first part, totaling $700 million, will be funded immediately and will be convertible into 360networks common stock at a price of $21.72 a share.

The remaining $300 million will be available after the companies sign the contract for a trans-Atlantic submarine cable and the placement of purchase orders for at least $100 million of Alcatel terrestrial products.

Shares of 360networks recently gained $2.44, or 15.6%, to $18.13 on the

Nasdaq

.

360networks will build a trans-Pacific submarine cable with Alcatel as the supplier. The company also plans to build an additional trans-Atlantic submarine cable and awarded the supply contract to Alcatel. Additionally, 360networks will award Alcatel a supply contract for at least $100 million to provide optical networking equipment for terrestrial networks.