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The big news in the market yesterday evening was Google’s announcement that it was acquiring Nest for $3.2B.  By the way, that’s $3.2B in cash. Nest makes smart thermostats and smoke detectors. Nest makes thermostats pretty and gives them cool digital features, but why did Google spend about 5% of its cash on hand for it?

My first wish is that Google is planning to make Smart House a reality (see above, aka a fantastic Disney Channel movie). But that likely a few years off.  And also probably not alleviating new concerns of Google knowing everything there is to know about you via your household appliances.

According to Mashable, the purchase is likely a reaction to Google’s struggles with creating successful hardware. The Google TV and cellphone were both failures. So far only Chromecast has shown any success as a hardware. This acquisition allows Google to learn about making hardware, plus it gets to expand its market offerings to something that doesn’t involve a screen. Some analysts think Nest may help Google’s entertainment offerings as well, such as facilitating the development of a smart TV that turns on/off and mutes itself at the right time on its own.

On top of that, Google gets a one up on Apple. Unlike Google, Apple has thrived in the hardware space. Nest allows Google to get a better understanding of consumer behavior and preferences in the home and diversity its device offerings, like Apple.  Plus, many Nest employees came from Apple, including the CEO.

The question left is whether Google paid an appropriate price for the company. As of Jan 2nd (less than 2 weeks ago) Nest was reported to be in the midst of raising a huge round of funding — between $150 million and $200 million – which put Nest’s future valuation somewhere between $2 billion and $3 billion according to sources. If that’s the case Google may have slightly overpaid, but was definitely within a range that makes sense.  And lucky Nest raised a lot more cash than it was expecting.

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One more quick thing to share.  Was checking out a notification I got about a CNNMoney article yesterday when I saw this:

CNN MOneyAnd then proceeded to do this:

weekend-update

Thank you so much to you all who actually read what I have to say!  And for allowing me to be a total nerd who fan girls over a CNNMoney shoutout.

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4 Comments on Why Google Bought itself a Nest Egg

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