Google announced late yesterday that it agreed to buy Nest Labs, which makes Internet-connected devices like thermostats and smoke alarms, for $3.2 billion in cash. The deal, which is expected to close in the next few months, appears a clear indicator of the Internet firm's plans to expand into the home automation market, an area that is also being highly pursued by cable companies.
According to Google, Nest will operate independently under its own brand and expand into more devices in the home. The company, which was founded in 2010, will continue to be run by Tony Fadell, who will report to Larry Page, co-founder and CEO of Google. Nest currently has about 300 employees and a team of more than 25,000 certified installers who install Nest products into homes in the U.S. and Canada.
Nest's Fadell wrote in a blog post that the company will continue to have its own brand identity but that Google will help it "fully realize our vision of the conscious home and allow us to change the world faster than we ever could if we continued to go it alone," he said, adding that Google has the resources, global scale and platform to accelerate Nest growth across hardware, software and services for the home globally. Fadell also said that Google has been an investor in Nest through Google Ventures, which led the company's Series B financing in 2011 and again in 2012 with its Series C financing. "I know that joining Google will be an easy transition because we're partnering with a company that gets what we do and who we are at Nest – and wants us to stay that way," he added.
Google's purchase of Nest is just another sign of the growing momentum behind home automation, which some estimate to be a $13 billion market. Cable companies have long been pushing into this market, with Comcast leading the way with its Xfinity Home Control service that supports video monitoring and remote thermostat controls.
Last June, Mitch Bowliing, SVP at Comcast, told attendees of the Cable Show that the company's XFinity Home service appeals to a broader set of customers--those that are interested in having a smarter home, not just having a secure home. In fact, Bowling said that more than 41 percent of XFinity Home customers are new Comcast subscribers and 64 percent are buying the complete triple play of cable TV, high-speed Internet and telephone service. About two-thirds of subscribers to Xfinity Home, which includes automation features like thermostat controls and the ability to control lights with mobile devices, have never had a home security service, Bowling said.
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