Google acquired Nest Labs (smarthome devices)

Companies in Relationship

Google, Nest Labs

Deal Facts

Initial Announcement Date: 1/14

Consideration: $3.2 billion in cash (Source: Google press release); consideration was stated later as $2.6 billion in 10-K); $2.3 billion allocated to goodwill (Google 10-K)

Google is acquiring Nest Labs for $3.2 billion in cash. Nest makes smart thermostats and smoke alarms for homes. If approved by regulators, the acquisition will be Google's second largest, second only to the Motorola Mobility deal. Nest has been a leader in the Internet of Things, which involves enabling everyday objects with communications technology to become more efficient and convenient.

Google Ventures had previously invested in Nest, leading two financing rounds in 2011 and 2012.

Google asserts that it will not interfere with Nest's products. The company will continue to operate under its own brand, sell its products, and provide support to existing and future customers. It remains unclear if Nest will share customer data with Google.

Strategic Implications

The Nest deal reflects yet another Google diversification effort beyond its core advertising business. (Google has also been moving into areas such as self-driving cars and robotics.)

In acquiring Nest, Google also acqui-hires CEO Tony Fadell, a former Apple executive, who was instrumental in developing the iPod. Fadell will continue to run Nest and will report to Larry Page. Fadell views the deal with Google as a growth "accelerant" for his company.

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