Google Inc. announced that it is about to buy Nest Labs Inc. for 3.2 billion dollars in cash. This deal is considered to be the second largest one in Googles history after the 12.4-billion-dollar Motorola Mobility acquisition in 2012.
Nest Labs Inc. is a maker of “smart” thermostats and smoke alarms for homes and is currently headed by Tony Fadell, who is a former Senior Vice President of Apple Inc. After the deal is finalized, Mr. Fadell will continue to run Nest Labs and report to Larry Page, who is the Chief Executive Officer or Google Inc. In an interview on Monday, Mr. Fadell said: “This is not my first rodeo. I understand what scale means. Ive used scale to my advantage in other places to really change the world.”
Currently, Google Inc. dominates Web search and is also one of the leading smartphone software makers thanks to its Android operating system. However, when it comes to hardware, the company falls behind, mainly because such an undertaking requires different skills related to design and manufacturing. The acquisition of Nest Labs Inc. is quite indicative about Googles ambitions to expand beyond its successful search advertising business, from robots to self-driving cars.
One of the analysts of Macquarie Securities – Ben Schachter, said on the occasion: “Google has done extraordinarily well with the technology behind a lot of different things, including Android and search. But their design has historically been relatively weak.”
The Nest Labs deal is said to make Googles competition with Apple even more fierce when it comes to the connected-device market, where Web-based software meets hardware. McKinsey Global Institute announced that it expects the deal to make Googles role in the so-called Internet of Things market even more important.
The hardware results of Google has lacked consistency so far. The third-quarter Motorola unit sales of the company were estimated to 1.18 billion dollars, which is a drop by 34% compared to the ones in 2012. In addition, the companys Nexus tablet has not proved to be a worthy rival to the Apples iPad.
According to CNN Money, the current share price of Google Inc. is 0.64% down, and its one-year return rate is 0.20% up. The 40 analysts offering 12-month price forecasts for Google Inc. have a median target of 1,125.00, with a high estimate of 1,313.00 and a low estimate of 850.00. The median estimate represents a +0.18% increase from the last price of 1,122.98.
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