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February 8, 2018

Google absorbs Nest as Alphabet standalone fails to take off

Google's AI assistant will soon be housed in a Nest doorbell.

By Sabrina Dougall

Google smart home systems will now incorporate Nest hardware after parent company Alphabet read the writing on the wall for the thermostat maker.

Google co-founder and Alphabet CEO Larry Page bought intelligent home hardware company Nest for $3.2bn in 2014 and hoped it would take root when planted as a standalone subsidiary two years later.

But the fledgling investment did not take off, as the market proved sluggish to adopt the firm’s flagship app-connected thermostat. Nest’s failure to branch into a network of connected products is something of a flop for Alphabet‘s diversification strategy. Nest had been one of the group’s largest revenue sources outside of its main blood supply from Google.

Nest’s team has already been absorbed into Google, with the tech giant’s AI home assistant soon to be installed within a Nest doorbell.

“The goal is to supercharge Nest’s mission,” wrote Nest CEO Marwan Fawaz and Senior VP Hardware Rick Osterloh in a joint blog post on Wednesday. “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.”

“We’re excited to make Nest an integral part of Google’s big bet on hardware,” the post added.

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Alphabet draws in 1% of its revenue from its separate ventures outside of Google. At the end of January, the group announced it was launching a cyber security outfit called Chronicle to develop an “immune system” for the digital sphere.

Last week, Google took on a $1.1bn slice of HTC’s hardware division in Asia. The increased hardware portfolio could fuel Google’s race to catch up to rival Amazon, whose home security system Key has faced criticism after hackers found ways to compromise the smart lock.

Cousin company Waymo is currently locked in a legal battle with Uber over accusations of stolen company secrets.

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