What is Google doing with Hardware?

On January 13th, Google shocked the tech world by announcing that it would be purchasing Nest Labs for a staggering $ 3.2 billion. This makes Nest Google’s second most expensive company purchase to date, after the acquisition of Motorola Mobility in 2011 ($ 12.5 billion).
Nest Labs is the company behind the Nest Learning Thermostat, a $250 Wi-Fi enabled smart thermostat in a futuristic design that adjusts home temperature according to the user’s behavioral patterns. More recently, Nest also released a $130 smart smoke and carbon monoxide alarm: the Nest Protect.

What is unclear, however, is why would search giant Google buy a thermostat company for that much money? The key to answering this question lies in another big move from Google, which happened just a few days ago: after merely a year of completing the acquisition of Motorola Mobility, Google is selling the device manufacturer to Lenovo, for just $ 2.91 billion.

Again, why would Google sell Motorola for under a quarter of the price it had paid for initially? This is where we can start distinguishing some patterns: Motorola’s purchase was not for the products it manufactured, but mainly for the enormous patent portfolio they owned, which served to protect Google’s Android OS from the legal attacks by competitor Apple. Needless to say that Google did not relinquish the collection of patents from Motorola. In fact, Google’s acquisition of a smartphone manufacturer had created some tensions with the other big Android smartphone companies, and most importantly Samsung. The latter had already started to shy away from Android by reinvesting in it’s own Tizen mobile OS. Letting go of Motorola now makes sense in that it re-establishes Android as a truly open mobile OS.

But without Motorola, Google now finds itself without a hardware division. And this is where Nest comes in, right? Well, yes and no. Google’s purchase of Nest was also not about Nest’s products more than it was about enlisting the people behind Nest’s innovations. Nest’s co-founders Tony Fadell and Matt Rogers are a big reason why Google valued that start-up so much. Tony Fadell was the Senior Vice President of the iPod division at Apple, and with him comes all the experience and expertise in designing unique products that only Apple could match. Just look at Nest’s thermostat and you can already sense the similarities. As a matter of fact, Fadell’s team is now rumored to take over as Google’s lead hardware designers.

At the same time, this purchase may constitute Google’s port of entry into the world of home automation, a domain the tech giant has not ventured into yet. Quoting Fadell, this partnership with Google is a “rocket ship” to Nest. I think we can very well expect to see Google’s cloud services integrated in Nest hardware in the future, or vice versa. For example: location services to track when you’re home or not, or integration of real-time home information into Google Now cards.

Google assures us however that Nest will stay a relatively independent company, and will retain its distinct brand identity. This was the strategy Google had adopted for Motorola, albeit it did provide the resources to supercharge Motorola’s reduced momentum, with the Moto X and Moto G as perfect examples. With that in mind, we expect to hear a lot more from Google and Nest’s partnership in the near future, along with a shift of focus towards the home automation industry.

Marc Chelala

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