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Alcatel Lucent Soci (ALU - Analyst Report) recently extended its collaboration with Intel Corporation (INTC - Analyst Report) for conducting research and development in cloud and security technologies. The alliance of the two companies is aimed to enhance the development of innovative technologies like Network Functions Virtualization (NFV).

NFV is intended to provide telecom operators with maximum benefits from their Internet Protocol (IP) networks, including the Long Term Evolution (LTE) infrastructure. The new technology is designed to substitute the hardware deployed at present with software solutions for the network. The software solutions, being more flexible, are expected to drive up innovation in the products and services while reducing costs significantly.

The two companies will invest together in the research and development of this technology. Areas of significant importance for research are Alcatel-Lucent's Virtualized Radio Access Networks (RAN), Cloud Platform and the High-performance Packet Processing for advanced IP/Multi-protocol label switching (MPLS) platforms and functions.

The integrated development of this trio would enhance LTE wireless solutions as well as the company’s CloudBand NFV platform to ensure an efficient testing, validation and deployment of the new technology. Furthermore, Intel’s expertise will enhance the company’s solutions for the virtual IP networks using the structured MPLS technology.

Separately, to further enhance the NFV, Alcatel-Lucent has also signed an agreement with a Spanish telecom company, Telefonica, S.A. (TEF - Analyst Report). The two companies will be collaborating for an efficient virtualization of the network using Alcatel-Lucent’s CloudBand NFV platform.

Prior to this, in Sep 2013, these two companies had an alliance for developing the 4G LTE network infrastructure. While in 2004, Intel and Alcatel-Lucent had joined forces to develop the interoperability testing program, WiMax.

Per sources, Alcatel-Lucent is following the strategy of product differentiation and innovative solutions to leverage its competitiveness in the telecom equipment industry. The company is intending to expand its market share while retaining its pricing power.

The company is on its way to reposition and establish itself as the specialist of IP and Cloud networking, ultra broadband fixed and mobile access per its ‘The Shift Plan.’ It has already seen improvement in its cash and balance sheet position in the past few quarters. Moreover, its share prices have surged by about 200% in the last year, reflecting the success of this strategy.

Alcatel currently carries a Zacks Rank #3 (Hold). Another stock in the industry worth considering at the moment is AudioCodes Ltd. (AUDC - Snapshot Report), which carries a Zacks Rank #1 (Strong Buy).

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