Nest is no longer a separate company under Alphabet
- Nest, the company that makes smart appliances like connected thermostats, is being folded back into Google. It will be overseen by Google hardware boss Rick Osterloh.
- Nest has been a separate company under the Alphabet umbrella since 2015, considered an "Other Bet" by the company.
- This is the first time one of Alphabet's so-called Other Bets companies has been folded back into Google.
Alphabet's smart appliance company Nest is being spun back into Google, the companies announced Wednesday.
The move is the first time one of Alphabet's so-called Other Bets should no longer stand alone, and calls into question why it was run as a separate business in the first place. Generally speaking, Alphabet pursues a broader strategy of launching a smattering of independent tech companies in hopes of finding the next big thing outside Google's massively profitable online advertising business.
Nest is now under the purview of Rick Osterloh, the head of Google's hardware division. That division makes devices like the Pixel smartphones and Google Home speakers. Nest makes internet-connected devices like smart thermostats, smoke detectors, and security cameras.
Google bought Nest in 2014 for $3.2 billion. Nest became a separate company in 2015, when Google reorganized into Alphabet — an umbrella company that encompasses Google alongside a group of smaller companies, including self-driving car pioneer Waymo, life sciences firm Verily, and cybersecurity tool developer Chronicle.
But Nest underwent a period of turmoil under its founder and CEO Tony Fadell, a tech executive famous for helping Apple create the original iPod. A harsh 2016 feature on Nest by The Information painted Fadell as a brash leader who alienated employees. Fadell stepped down as Nest's CEO a few months later.
Nest hired former Motorola executive Marwan Fawaz as its new CEO. Fawaz will remain in the Nest division and report to Osterloh, according to CNET.
Under Fawaz, Nest faced pressure to launch new product categories, something it hadn't done since it Google bought the company in 2014. Nest finally launched a suite of new products in September of last year, including a smart alarm and camera-equipped doorbell. The doorbell still hasn't shipped to customers.
Nest rejoining Google likely won't come as a surprise to many. In fact, it appeared Alphabet was putting the pieces in place for the move over the last year or so. In August 2016, many of Nest's software employees were reassigned to Google's hardware division.
Meanwhile, Google's hardware division continued to grow, thanks to the increased corporate focus on its Pixel phones and Google Home speakers. As Google's hardware efforts accelerated, it seemed odd that Alphabet would keep Nest as a separate hardware company that could potentially compete with what Google was cooking up. Folding Nest back into Google has always seemed inevitible to many observers.
Wednesday's move also calls into question Alphabet's broader strategy of creating a bunch of different tech companies in hopes of stumbling onto a new growth area outside of Google's core advertising business. Since Alphabet formed, none of the so-called Other Bets, including Waymo and Verily, have turned into a breakout success. Other Bets continue to lose money and have failed to generate significant revenue. Alphabet's success is still tied to Google's dominance in search and online advertising.
Access, Alphabet's internet connectivity company that includes Google Fiber, seems to be the next likely candidate to get the axe. Google Fiber ended its plans to expand to more cities in 2016, and the company just announced it hired its third CEO in a year and a half. Sources close to Access have previously told Business Insider that many think Alphabet will want to sell Access to a third party or fold it back into Google.
Below is the announcement published by Osterloh, the head of Google's hardware division. A Nest spokespan declined to comment further.
Smart homes are no longer just a thing of the future. They make families feel safer with connected security systems. They help you save energy and money with intelligent thermostats. And they offer hands-free help and answers to a universe of questions with voice-activated smart assistants.
Since Nest joined Google four years ago, the team has experienced incredible momentum. The company doubled its hardware portfolio last year—selling more devices in 2017 than the previous two years combined. Meanwhile, Google has sold tens of millions of products for the home in just the last year, as more people use the Google Assistant to listen to their favorite music, control their connected devices, and get useful information about their day.
To build on this momentum, we're excited to bring the Nest and Google Hardware teams together. The goal is to supercharge Nest’s mission: to create a more thoughtful home, one that takes care of the people inside it and the world around it. By working together, we’ll continue to combine hardware, software and services to create a home that’s safer, friendlier to the environment, smarter and even helps you save money—built with Google’s artificial intelligence and the Assistant at the core.
We’ve had a head start on collaborating since our teams already work closely together, and today we’re excited to make Nest an integral part of Google’s big bet on hardware.