HP and Alcatel Gear Up to Fight Cisco With a Twist

Hewlett-Packard (NYSE:HPQ) and Alcatel-Lucent (NYSE:ALU) have announced a 10-year business agreement and alliance to jointly market products. The goal is to offer one-stop shopping as IT and telecommunications converge.  For some, the announcement isn't news. 

However, there are some twists that make it different from past agreements.  HP gets to manage Alcatel-Lucent's IT infrastructure, which could be a juicy outsource deal for HP. Alcatel-Lucent gets to reduce costs by transferring 1000 employees to HP.  So, both companies have more skin in the game.

The agreement has strong potential and could present a significant threat to Cisco (NasdaqGS:CSCO).  Avi Cohen of Avian Securities has indicated "This is another effort from HP to establish footprint within Cisco's customer base, such as the carriers, and aggressively pursue a new market opportunity for the carriers".

While access to carrier business is a clear benefit for HP, Alcatel-Lucent has the chance to increase its enterprise business.  Although financial details aren't available, the two companies have speculated the partnership could generate several billion dollars in revenue over the next decade.

As the alliance ramps up, customers can anticipate increased efficiencies, and channel partners from both companies can expect growth in new markets.  Yet Cisco is formidable, and it remains to be seen how the alliance will play out.

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