Nest may be disappointing Alphabet when it comes to cash

Would Alphabet put down what Google picked up? Or will things change to a major degree? Either Amazon has become the Internet of Things hub or Nest is stuck in a tide pool where a slow rise just isn’t enough.

In 2014, Google had purchased the smart thermostat-maker for $3.2 billion. The terms of purchase allowed key employees to retain their positions and set a three-year operating budget for the unit — Re/code has sources saying it was in the neighborhood of $1.5 billion. But as Nest is in the middle of that third year, it may run out of money to continue business as usual unless holding company Alphabet agrees to pick up funding. And while it did manage healthy revenue of about $340 million last year, the road getting there may be considered too costly and the road ahead may be thought too risky for Alphabet to continue feeding into the venture.

From the outset, Google and Nest had agreed upon a $300 million annual revenue target. The startup could not reach that target until it acquired Dropcam in 2015. Aspects of that $555 million move alienated some Dropcam employees enough for them to abandon ship — that’s including its two co-founders with one of them publicly expressing disappointment with Nest’s CEO. And while the introduction of the Nest Cam ramped up sales for a while, sales of that product, the Nest Learning Thermostat and the Protect smoke alarm have slowed since.

Meantime, some Nest executives may be able to cash out their shares of the company soon as their contractual retention or vesting period comes up within the year. And as Alphabet starts tightening the purse strings on its withering properties, Nest could have little chance to keep things going beyond 2016.

Source: Re/code

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About The Author
Jules Wang
Jules Wang is News Editor for Pocketnow and one of the hosts of the Pocketnow Weekly Podcast. He came onto the team in 2014 as an intern editing and producing videos and the podcast while he was studying journalism at Emerson College. He graduated the year after and entered into his current position at Pocketnow, full-time.