Google's Nest Buyout Is a Shrewd Move: 10 Reasons Why

 
 
By Don Reisinger  |  Posted 2014-01-15 Email Print this article Print
 
 
 
 
 
 
 
 

Google announced a blockbuster deal on Jan. 13, acquiring "home conscious" company Nest for $3.2 billion in cash. If the deal is approved by regulators, Nest, which was founded by former Apple executive Tony Fadell, will become part of the Google family. Like Google-owned Motorola, Nest will operate under its existing brand identity and will be generally independent from Google's core services. Google's acquisition was steeped in its desire to get in on home automation, rather than to remold Nest in Google's image. Nest is arguably one of the most innovative companies in the technology industry right now. The company started off with a learning thermostat aimed at reducing energy consumption. The company recently launched a smoke/carbon monoxide alarm that could also act as a nightlight and communicate with its thermostat if carbon monoxide is detected. Nest reportedly has plans to offer other as-yet-undisclosed home gear. Still, Google's Nest acquisition is a big one for the industry. But some questions about why Google acquired Nest remain. Here are some more reasons why.

 
 
 
  • Google's Nest Buyout Is a Shrewd Move: 10 Reasons Why

    By Don Reisinger
    Google's Nest Buyout Is a Shrewd Move: 10 Reasons Why
  • There's Little Work to Be Done

    One of the nice things for Google about buying Nest is that the smart thermostat company is already an established firm that understands where it needs to go and how to get there. This isn't Google buying Motorola to fix the ship. Nest is a successful company that has a clear view on how it can be even more successful. And that attracted Google to Nest.
    There's Little Work to Be Done
  • Home Automation Is Huge

    Home automation is a strategic priority for many companies in the industry. While in 2012, the home automation industry could only muster $3.6 billion in value, recent data released by Transparency Market Research found that it will be valued at $16.4 billion by 2019. If that growth is realized, Nest could be viewed as a bargain just five years from now.
    Home Automation Is Huge
  • The Faster Buildup for Google

    Rumors had been swirling for months that Google was looking to get into the home automation and energy fields. In fact, the company was reportedly working on its own Nest thermostat competitor. But rather than invest in all the research and development, Google made the reasonable decision to dig into its horde of cash and spend $3.2 billion to acquire the company that seems to be doing it right already.
    The Faster Buildup for Google
  • It's a Bargain—Now

    Looking at a cash payment of $3.2 billion might seem hefty, but the truth is, the deal was a bargain. Nest recently launched its smoke/carbon monoxide alarm and was reportedly working on other products to improve home energy usage. That might mean that Nest's business would grow in the coming years and thus gain more value. Buying Nest now might have been a good idea.
    It's a Bargain—Now
  • Nest Has Already Built a Network of Certified Installers

    One of the most important aspects of Nest's business is that it's built around an innovative team of professionals. The company's product design is outstanding, its software impeccable and its customer service highly effective. Nest's innovators can do a lot of good at Google.
    Nest Has Already Built a Network of Certified Installers
  • Nest's Innovative Team Will Be Part of Google

    One of the most important aspects of Nest's business is that it's built around an innovative team of professionals. The company's product design is outstanding, its software impeccable and its customer service highly effective. Nest's innovators can do a lot of good at Google.
    Nest's Innovative Team Will Be Part of Google
  • Google Already Had Investment

    Although Google might be spending $3.2 billion to buy Nest, it's getting some of that investment back. Google Ventures led Nest's series B round of financing in 2011 and did the same in its series C round in 2012. It's unknown how much stock Google Ventures owns, but it's also benefiting from this deal on the financial side.
    Google Already Had Investment
  • Google Needs to Move Deeper Into the Home

    If Google's efforts to expand beyond search and mobile are to succeed, the company needs to be willing to "go home." There are real opportunities for Google to increase its presence in the home with Android, Chrome and its Google Play store. There's no telling how Nest might help that effort, but one can bet it'll play a role.
    Google Needs to Move Deeper Into the Home
  • Think Internationally

    Nest has been making inroads in the U.S. and Canada, but where the company is most likely to succeed is internationally in markets that it hasn't yet competed in. Even Nest said in a blog post announcing its deal that the Google partnership will allow it to "get our products into the hands of people around the world—faster." North America is a fine market to start in, but real success comes internationally—and that's where Nest can succeed beyond current expectations.
    Think Internationally
  • Google's Consumer Hardware Design Is a Weak Point

    Let's face it, some of Google's consumer market hardware has fallen short. Just look at the company's Chromebook Pixel, which was essentially a MacBook knockoff. The Chromecast dongle is bulky for what it does and its power requirement is a turn-off to some customers. And remember that Google Nexus Q entertainment streaming device? It was a gimmicky mess. Rather than invest in product design for a new line of thermostats for the home market, it made sense to acquire Nest to acquire its design insight in that space. Stellar hardware design is part of the reason Nest is so successful. It's also part of the reason Google wanted the thermostat maker.
    Google's Consumer Hardware Design Is a Weak Point
 
 
 
 
 
Don Reisinger is a freelance technology columnist. He started writing about technology for Ziff-Davis' Gearlog.com. Since then, he has written extremely popular columns for CNET.com, Computerworld, InformationWeek, and others. He has appeared numerous times on national television to share his expertise with viewers. You can follow his every move at http://twitter.com/donreisinger.
 
 
 
 
 
 

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