Google to buy Nest Labs for $3.2 billion in cash

Google Inc. announced Monday that it will spend $3.2 billion to acquire Nest Labs Inc., a Silicon Valley company founded by former Apple Inc. employees to develop better versions of common devices for homes.

“Nest’s founders, Tony Fadell and Matt Rogers, have built a tremendous team that we are excited to welcome into the Google family,” Google CEO and co-founder Larry Page said in Monday’s news release.

Palo Alto, Calif.-based Nest last year introduced a connected smoke detector to its product line, which previously included a thermostat originally launched in late 2011. At Apple, Fadell and Rogers led teams that created the iPod and the iPhone, and Nest had received backing from Google’s venture capital arm as well as Kleiner Perkins Caufield &Byers.

“We’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 CEO Fadell said in the announcement.

Nest will continue to operate as a stand-alone company with Fadell at the helm, Google announced Monday, with the deal expected to close in the next few months.

In a Q&A blog post, Rogers – now the company’s vice president of engineering – said that Nest would continue to support Apple’s iOS mobile operating system as well as all Web browsers, but mentioned a future where Nest uses Google products in new ways.

“I’m betting that there’s a lot of cool stuff we could do together,” Rogers wrote.

The Nest acquisition gives Google a foothold in one arena of the “Internet of Things,” the growing phenomenon of connecting ordinary items to the Internet. Silicon Valley tech giants are laser-focused on the opportunity for growth in the field, with Cisco Inc. CEO John Chambers saying at CES this month that it represents a $19 trillion opportunity.

“This will be potentially the biggest business opportunity in the history of people,” Janusz Bryzek, a vice president at San Jose, Calif.-based Fairchild Semiconductor, told the San Jose Mercury News last month about the Internet of Things. “We are changing the Earth.”

Google claimed to have $56.5 billion in cash and convertible cash equivalents as of Sept. 30 in the Mountain View, Calif., search giant’s most recent quarterly earnings report with the Securities and Exchange Commission.

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