Google & Nest Relationship Going Sour?

Google & Nest Relationship Going Sour?
Photo Credit: egg™ via Compfight cc

Sometimes expectations are different – radically different from reality. Something good might not always end up on the positive side. Relationships, no matter how sweet, might become sour or bitter in the course of time. And that might be the case between Google and Nest.


If one can recall, the tech giant bought the smart home appliance start-up in 2014 for an amount of $3.2 billion USD, reports Vanity Fair. And just last year, the company was adopted under the umbrella of Google parent, Alphabet that has several ambitious experimental projects under its wings.

However, it appears that Alphabet might be putting pressure on its so called “moonshots,” for apparently not generating much income for the company, including Nest. Re/code reports that last year, Nest has managed to generate about $340 million USD in sales, according to sources knowledgeable in the matter.

While the amount looks impressive enough for a company in the budding market of internet connected devices, it is, however, below the initial expectations set by the search engine for them. Nest’s sales performance may even face more scrutiny from Alphabet where it sits now, especially as the hardware manufacturer is facing its most critical year ever.

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The smart home appliance start-up’s dilemma is a far cry from its former situation two years ago. During that time, it was brought on as one of the tech giant’s biggest acquisitions as a vehicle to compete with Apple in the fast growing smart home industry. Google has also bought on CEO Tony Fadell and ex-Apple exec to inject the tech giant with the Cupertino Company’s hardware sensibility.

During the late 2013, Fadell negotiated the sale to the tech giant and two parties settled for two provisions. He then ensured that he would have an operating budget from Google, while the latter created a significant retention clause to ensure that the start-up’s key executives and engineers stayed onboard.

Google has also managed to keep employees from leaving after the buyout by creating a vesting schedule that prevents Nest’s executives from cashing out their shares before a certain date, which is not clear but is hinted to be close enough from arriving. Both companies have also agreed on a sales target annually for the company which is $300 million USD.

According to multiple resources, the initial budget for the start-up was set around $500 million USD annually. That agreed budget was set for three years. And this year happens to be the third year already, unless Alphabet still sees Nest to be worth funding, the start-up will be running out of budget soon.

Two years after acquisition, the former smart home appliance firm still couldn’t hit that target. Although it did hit it, only after adding sales from Dropcam. Dropcam is another start-up company dealing with security cameras, that Nest acquired six months after joining the tech giant, for $555 million USD.

That acquisition alone is far from smooth sailing as it has come to light that several Dropcam employees, including two founders, have left. Its former CEO Greg Duffy has even voiced his dissatisfaction with Fadell – twice.

BGR also adds that the past weeks, reports has also been coming out which suggests that Fadell is something of a tyrannical boss the same as Steve Jobs at his worst. Additionally, some of Google’s big bosses are reportedly disappointed that the smart home appliance hasn’t been able to come out with more hardware.

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