Why Google is buying home automation startup Nest «
SAN FRANCISCO (MarketWatch) — Why is Google Inc. /quotes/zigman/93888/delayed/quotes/nls/goog GOOG +0.62% spending $3.2 billion to buy home-automation startup Nest Labs Inc.?
Nest Labs is best known for its innovative new home products, including an energy-efficient thermostat and smoke/carbon dioxide alarm. Analysts say the Google buy is clearly aimed at the emerging market for consumer devices managed from and connected to the Web.
Still, the Google announcement surprised some analysts. “This seems outside of what I would expect,” Needham analyst Kerry Rice told MarketWatch. “It’s a little surprising.”
But he said the acquisition appeared to be a “consumer hardware play” that fits in with the consumer-technology trend referred to as the “Internet of Everything.”
“I think they would like to be involved in all aspects of the consumer, so maybe this was a missing piece in their portfolio that they thought was going to be a growing opportunity,” he added.
Wedbush analyst Shyam Patil echoed a similar view, saying, “I wouldn’t say [buying Nest Labs] is on the top of my list. But I certainly see how it makes sense.”
Especially given the dominant theme in the just-concluded Consumer Electronics Show in Las Vegas last week, he added.
“The ‘Internet of things’ and the connected devices — those were the biggest things that came out of CES,” he told MarketWatch. “This is very much a play on that theme. This is obviously focused on the connected home or home automation.”
In a statement, Google CEO Larry Page praised Nest Labs for ”already delivering amazing products you can buy right now — thermostats that save energy and smoke/CO alarms that can help keep your family safe.”
But Google likely has its eyes on issues beyond home safety. Analyst Ray Wang of Constellation Research said buying Nest also boosts Google’s position in the next battlegrounds when it comes to connected devices.
“The next battle in connected devices will be cars and homes,” Constellation Research analyst Ray Wang told MarketWatch. “This is really about going after connected devices and delivering them on Google platforms.”