Google Is Buying Connected Device Company Nest For $3.2B In Cash

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Google is acquiring connected device company Nest for $3.2 billion. Google sent out an email to employees noting the acquisition today and later issued a press release.

In the release, Google noted that Nest has been offering its best-selling thermostat since 2011 and recently began offering the Protect smoke alarm, which networks with its other devices.

Nest Founders Tony Fadell and Matt Rogers will both join Google. Rogers was one of the first engineers on the iPhone team at Apple.

“They’re already delivering amazing products you can buy right now–thermostats that save energy and smoke/CO alarms that can help keep your family safe,” said Google CEO Larry Page in a statement. “We are excited to bring great experiences to more homes in more countries and fulfill their dreams!”

Fadell, who is known as the ‘father of the iPod’, said that they’re ‘thrilled to join Google.’ “With their support, Nest will be even better placed to build simple, thoughtful devices that make life easier at home, and that have a positive impact on the world.”

Nest will continue on as its ‘own brand identity’ and continue to be led by Fadell. The deal hasn’t closed yet as it has to meet regulatory approval.

Nest founders Fadell and Rogers also sent an emailed statement to TechCrunch about why Nest chose to go ahead with the acquisition.

“Google will help us 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. We’ve had great momentum, but this is a rocket ship,” Fadell says. “Google has the business resources, global scale and platform reach to accelerate Nest growth across hardware, software and services for the home globally. And our company visions are well aligned – we both believe in letting technology do the hard work behind the scenes so people can get on with the things that matter in life. Google is committed to helping Nest make a difference and together, we can help save more energy and keep people safe in their homes.”

Fadell says that this decision was not made hastily. He says that at the 2011 TED conference — even before Nest had launched — he and Nest VP of business Erik Charlton had ‘huddled’ together in a corner with Google’s Brin to show him a video and early model of the Nest thermostat.

He instantly got what we were doing and so did the rest of the Google team when we showed them. In May 2011, Google Ventures led our Series B round of financing, and in 2012, Series C. Time and time again, Googlers have shown themselves to be incredibly like-minded, supportive and as big of dreamers as we are. 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.

We’ve been hearing rumors about Nest getting courted with large billion-dollar acquisition offers for months now, but a Google buy is a definite statement. The company has been fairly serious about its connected-device efforts for a while but hasn’t quite been able to get anything to gel. For instance, there have been some abortive attempts at connected devices like Android at Home in the past. But Nest already has a nice start in producing well-designed and connected home devices — something that Google should be able to build off of in the future.

Peter Nieh, a partner at Nest investor Lightspeed Venture Partners, has a post up about his early days working with Fadell at startup General Magic and what Nest has done since. He also shared a photo of the pair from 1992:

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Nieh says that though he was excited to work with Fadell again when it came time to invest in Nest, “…our excitement went off the charts when we met Matt Rogers, Tony’s co-founder, who was responsible at Apple for iPod software development and one of the first engineers on the original iPhone team.  We would have invested had they been looking to start a food truck.”

We reached out to Nieh for more thoughts, and he told TechCrunch that “Nest is a very special company — it’s a combination of an incredible team led by Tony and Matt, world-changing vision, and world-class execution.

“The acquisition by Google is just a milestone along the way as they continue their quest to change the world,” he added. “I can’t wait to see how they will continue to bring magic to all those unloved things in our homes.”

Google has previously been rumored to be investigating ramping up its own smart thermostat efforts, but this would likely supplant that — or the Nest team would take those projects over. Google also has an interesting project called PowerMeter, which monitors power consumption over time which could have some cool applications here.

The acquisition could also provide a patent boost of some sort for Google. In December, Nest said that it had 100 patents granted, with 200 more on file with the U.S. Patent Office and another 200 ready to file. Nest has been the target of some fairly high-profile patent suits and threats from legacy manufacturers like Honeywell over its thermostat and BRK over its Protect smoke detector. Google will likely offer shelter from further suits with its wide range of patents across a variety of technology arenas.

As far as how much autonomy Fadell will have to execute on his vision of what Nest can be, it doesn’t make a lot of sense for Google to derail a business that — by most counts — was fairly successful already and had been garnering praise from consumers over design. It could help with infrastructure problems that have caused failed firmware upgrades, which recently prompted complaints.

There’s also bound to be an immediate and visceral reaction to the access that Google will now have to information about when you’re home, which rooms you’re in and more. Which is why Nest also issued a Q&A about what will happen to users now that Google owns their thermostats and smoke detectors:

Will Nest continue to support iOS so I can have the Nest app on my iPhone or iPad?

Yes, absolutely. We’ll continue supporting iOS, Android and modern web browsers so you can check in on your home and control the temperature from wherever you are.

Will Nest and Google products work with each other?

Nest’s product line obviously caught the attention of Google and I’m betting that there’s a lot of cool stuff we could do together, but nothing to share today.

What will happen to the Nest warranties on products?

No change there – we stand behind our products like we always have.

Will I still be able to find Nest products at my local retailer?

You bet. We intend to continue selling through the same partners in the US, Canada and the UK.

Will Nest customer data be shared with Google?

Our privacy policy clearly limits the use of customer information to providing and improving Nest’s products and services. We’ve always taken privacy seriously and this will not change.

That answer is a bit vague, but the concerns over the recent revelations of enormous data gathering efforts on the part of the NSA should definitely cause some to worry. Whether Google chooses to share information voluntarily, it’s still a big target for those looking to hoover up vast swaths of data about its users, and that will only be more likely as time goes on, not less.

The deal is also set to make the startup’s early investors — Kleiner Perkins Caufield Byers and Shasta Ventures — a lot of money.