In a deal surprising only for its enormous purchase price, Google has announced that it’s buying Nest Labs, the hot maker of tech-infused household devices such as thermostats and smoke alarms, for $3.2 billion in cash.
Nest, which had financial backing from Google’s venture arm, has been lauded for its elegant takes on common household products, and it seems clear that it has no intention of stopping at thermostats and smoke alarms. As Internet-connected smart devices continue to proliferate in the home and beyond, it’s likely that they will create, or disrupt, multibillion-dollar markets in much the same way Apple did for smartphones and tablets.
That’s why a Nest backed by Google, now the second big pillar in mobile devices with its Android software and hardware, could blunt apparent intentions by Apple to move beyond computing and communications devices. While Apple has not announced plans for other devices, it’s said to be working on a smart watch and a television, and many observers believe it’s likely Apple would be interested in offering new takes on other home and consumer devices.
Nest, cofounded four years ago by former Apple executive and iPod creator Tony Fadell and Matt Rogers, another former Apple employee, will continue to operate under its own name and Fadell’s leadership, Google said. The deal could close in the next few months.
In the release, Google CEO Larry Page said the founders have built a “tremendous team that we are excited to welcome into the Google family. They’re already delivering amazing products you can buy right now–thermostats that save energy and smoke/CO alarms that can help keep your family safe.” He said Google is looking forward to bringing “great experiences to more homes in more countries.” Google has tried a couple of energy initiatives, including a smart home energy monitoring system, but they have not proved successful.
For his part, Nest CEO Fadell said that with Google’s support, “Nest will be even better placed to build simple, thoughtful devices that make life easier at home, and that have a positive impact on the world.”
In his own post, Fadell expanded upon the reasons why he sold out to Google relatively early:
Google will help us fully realize our vision of the conscious home and allow us to change the world faster than we ever could if we continued to go it alone. We’ve had great momentum, but this is a rocket ship.
Google has the business resources, global scale and platform reach to accelerate Nest growth across hardware, software and services for the home globally. And our company visions are well aligned – we both believe in letting technology do the hard work behind the scenes so people can get on with the things that matter in life. Google is committed to helping Nest make a difference and together, we can help save more energy and keep people safe in their homes.
This decision wasn’t made on a whim – Google has been in the mix in some way or another for about three years of our almost four-year history. In fact, my first meeting with Google as a Nester was before we’d launched. At the 2011 TED Conference, Erik Charlton and I huddled in a corner with Sergey Brin to show him a video and an early model of the Nest Learning Thermostat – he instantly got what we were doing and so did the rest of the Google team when we showed them. In May 2011, Google Ventures led our Series B round of financing, and in 2012, Series C. Time and time again, Googlers have shown themselves to be incredibly like-minded, supportive and as big of dreamers as we are. I know that joining Google will be an easy transition because we’re partnering with a company that gets what we do and who we are at Nest –and wants us to stay that way.
While the price seems dear for a company with only two products, those products clearly impressed Brin and Page with their potential. Google itself has been pushing into markets well beyond its search and advertising businesses, with self-driving cars, wearable computers, robots, WiFi balloons, and more that seem to get at a larger goal whose parameters are still unclear.
But in any case, that goal would seem to present a challenge to Apple, known more than anything else for producing elegant products that people can’t live without. Buying Nest gives Google a way to do the same well beyond the sphere of computing–and do it right away.