* Past telecom network equipment marriages hit problems
* Networks' "brains" now lie more in software thancustomised hardware
* Nokia promises 900 million euros of cost savings by 2019
* Rivals may still pounce if Nokia-Alcatel distracted
By Leila Abboud, Jussi Rosendahl and Sven Nordenstam
PARIS/HELSINKI/STOCKHOLM, April 21 (Reuters) - Nokia's acquisition of smaller rival Alcatel-Lucent may avoid the pitfalls that befell earlier telecom networkequipment marriages, thanks to a revolution over the past decadein how products are launched and developed.
The brains and brawn of telecom networks today lie insoftware, which is programmable and flexible, and not incustomised hardware as in the past. Products are more modularwith open interfaces that allow equipment from differentmanufacturers to talk to each other.
That should make it quicker and cheaper to combine the twocompanies' products, analysts and telecom executives said, andmay help Nokia succeed where other acquisitions have struggled.
Nokia has promised 900 million euros ($960 million) of costsavings by 2019 from the Alcatel-Lucent acquisition, which isset to be completed in the first half of next year.
Analysts believe the biggest chunk will come from thewireless business where Nokia's 4G mobile network products willeventually replace those of Alcatel, allowing it to trimexpensive R&D budgets and redeploy engineers.
The history of mergers in the telecom equipment sector ispoor - including those that brought Alcatel together withLucent, and Nokia with Siemens in 2006.
The cost savings promised from those deals ended up beinggiven back to customers via lower prices because rivals Ericsson and Huawei went on the attack to stealcontracts while the companies were distracted by theirintegrations.
Culling product portfolios also proved costly and slowbecause of the need to keep supporting gear already installed inmajor telecom carriers' networks. A mobile base stationinstalled at an operator such as Verizon or Vodafone remains in service for a decade and the equipment makercommits a team of engineers to a "product development roadmap"to improve it over time.
This time more of those improvements can come from softwareupgrades so merging product lines will be easier, Nokia ChiefExecutive Rajeev Suri promised investors after unveiling theAlcatel deal.
"While some of our past integration experiences have beenpainful at times, you should not be thinking about swap-outcosts in the same way as in the past," he said. Open interfaces, 4G technology and cloud computing "allow more rapid andefficient integration", he added.
Getting the transition right is essential to achieving thesynergies and avoiding alienating major customers such asVerizon or AT&T, the two leading carriers in the UnitedStates which have installed Alcatel-Lucent's 4G technology.
"What took Alcatel-Lucent and Nokia Siemens four or fiveyears to do on the product roadmaps last time around will onlytake two or three years this time," said Pierre Ferragu, analystat Bernstein Research.
However, Exane BNP Paribas analyst Alexandre Peterc is lessconfident and predicted that only half the promised 900 millioneuros in cost savings will materialise.
MOMENTUM RISK
Risto Lehtilahti, union representative at Nokia's R&D unitin Oulu, Finland, expressed concern that the company would losemomentum with clients during the integration, as it had duringthe Siemens merger and purchase of Motorola's U.S. mobileassets.
"Market shares have never been sustained after thesemergers. As we are going through the transition period andbefore the picture clarifies, part of the orders will go to therivals Ericsson and Huawei," he explained.
"The clients know what those vendors have and how theirsystems work, while it could take one or two years for usto come up with the product portfolio and client systems."
Analysts have pointed to contracts at U.S. number threeoperator Sprint as vulnerable because Nokia and Alcatelare the two primary suppliers for the 4G rollout, and thecarrier may want to bring back Ericsson to maintain competition.
China's three mobile carriers, which are in the midst of ahuge national 4G expansion, could also shift their spending abit more to Ericsson since the state had mandated that foreignsuppliers each get 10 percent of the contracts. After the dealNokia would have 20 percent versus Ericsson's 10 percent, whichmay prompt a rethink.
Analysts are divided over how much such "dis-synergies"could hurt Nokia, with Deutsche Bank saying contracts worth 1.5billion euros are at risk and Bernstein putting it at less thanone third of that level.
Nokia tried to reassure investors last week even as itadmitted that some contracts could be at risk. "We know that inthese kind of transactions there could be situations which aredifficult to foresee beforehand... so we're being prudent," saidSuri.
The companies will also need to get ahead in the nextproduct cycle. Bringing together Nokia's strengths in wirelessand Alcatel's in Internet routing equipment positions thecompany for 5G, the next generation of mobile technology, whendistinctions between fixed and mobile gear will largelydisappear.
While 5G is not expected to be introduced until 2020,analysts say carriers will judge 5G suppliers by their abilityto present a single product roadmap by late 2017 or face a lossof market share for future orders. ($1 = 0.9347 euros) (editing by David Stamp)
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