Why Apple didn’t buy Tony Fadell’s Nest Labs

“With Google announcing yesterday that it acquired the Tony Fadell-led Nest Labs for a cool US$3.2 billion, an emerging narrative is that Google caught Apple asleep at the wheel,” Yoni Heisler writes for TUAW. “For many who keep a close eye on tech, an Apple/Nest Labs acquisition seemed like a match made in heaven.”

“I myself was quick to hop on this bandwagon,” Heisler writes. “But the more I thought about it, the more it became clear to me that Apple purchasing Nest, especially for billions of dollars, just didn’t make a whole lot of sense.”

“There’s no denying that Nest Labs is doing some really cool work and has already put out two really great and forward-thinking products in just three years time. And again, there’s no denying that Nest’s products have a distinctive Apple-y vibe to them, a fact which shouldn’t come as much of a surprise given that the company was co-founded are two highly regarded Apple alums,” Heisler writes. “That notwithstanding, assume for a second that Apple was the company that purchased Nest Labs. Now what? Now Apple all of a sudden finds itself selling thermostats and smoke detectors. And it paid $3.2 billion for that privilege? Where’s the win there?”

Read more in the full article here.

MacDailyNews Take: Apple didn’t want Tony enough to keep him the first time. Why would they pay the fargin’ ridiculous sum of $3.2 billion to get him back? If they really wanted him, they could have kept him at Apple for his entire natural life – built him his own building and given him his own engineering staff to make thermostats, smoke alarms, and whatever else – for far, far less than that.

Related articles:
Feuds, funding and a fed up Fadell: Why Apple didn’t buy Nest – January 14, 2014
Did Tim Cook blow it by not snapping up Nest before Google? – January 13, 2014
Google to buy Nest Labs for $3.2 Billion – January 13, 2014
Tony Fadell introduces Nest Protect smoke and carbon monoxide detector – October 8, 2013
Tony Fadell, Father of the iPod: From Apple to Nest Labs, always a designer – July 24, 2013
Apple Store to sell Tony Fadell’s Nest Learning Thermostat, report claims – May 25, 2012
‘Father of the iPod’ Tony Fadell shows off his new project: Thermostats – October 25, 2011


    1. “If they really wanted him, they could have kept him at Apple for his entire natural life – built him his own building and given him his own engineering staff to make thermostats, smoke alarms, and whatever else – for far, far less than that.”

      Which is precisely what John Sculley did to Steve Jobs and his inner circle in 1984, when Apple’s board of directors sided with Sculley—Sculley was ready to announce Apple’s first-ever dividend, resulting in Apple’s first-ever stock split, shortly after Jobs’ departure.

      That didn’t work out too well for Apple did it MDN?

      Steve Jobs and his hearty crew flew Jolly Roger on Apple’s campus as a big fuck you and then left unabated. Granted Tony’s constitution pales in contrast to Jobs’ but I don’t see Tony returning to Apple, ever.

      Tony jumped in bed with the devil.

  1. The only thing that scares me a little with the story is that it might make Apple Staff think : “I work for Apple I make millions if I include my aapl stock bonus BUT if I start my own company maybe I can sell it for BILLIONS”.

    (ok ok don’t flame, I know starting a successful business is risky and needs luck (get an spend crazy Page to buy your company) and not everyone is cut out to be an entrepreneur, and actually profit is less than the billions sell price etc. but the thought just popped into my mind.

    Other thing is that as I’ve pointed out before aapl stock price is actually important to keep staff. The bulk of a top execs pay is tied to stock. Imagine how much Cook, Ive, Federighi etc lost when the stock dived from 700 – millions of bucks for each. Many young hotshots want to join rising star companies (like Facebook several years ago ) so that they can become millionaires quick when the company succeeds and the stock shoots up . So stock price is important in attracting highest level talent. )

    1. Not too worry, but who wouldn’t think that way? Do you want to work for someone else forever?

      Not everyone at Apple is making millions. Those who don’t, still think about a future outside of Apple.

      I can imagine people at Apple giving notice everyday, for myriad reasons. Perhaps as many leaving involuntarily for cause; violations of company policy, but probably a broken trust from which there is no recovery in this industry.

      The people Apple needs will always be available. It’s seasonal really and cyclic, like the periods leading up to a new device, people put their hearts into their work, forgetting about relationships, hygiene, and eating and when the product is finally released, many move on.

      They can’t take the pressure-cooker environment, chiefly because they don’t have a worldview of the product due to internal secrecy policies and may never know whether the role they played made a contribution, unless something specific comes down through the chain-of-command.

      There are 10s-of-thousands of Apple employees whose work is administrative in nature and never actually see the products themselves in their daily grind but Tim Cook would be the first to admit, without these people Apple doesn’t roll, much less rock.

  2. I’d have to agree with this. For a few hundred million, many this makes sense. For $3.2 Billion? Hmm.

    Also, I got to believe that Ives & Co can invent an awesome thermostat for much less than $3 Billion if that’s important.

    1. Agreed, Apple could easily enter the thermostat, smoke detector, widget business if they so desired, and probably create a product if not as good, better than Nest. 3.2 billion? Google has plans beyond what these devices already do, and it’s malicious. Do we really want to be tracked beyond the amount we already are? Not me. And I was just on the verge of getting their smoke detector too. Not now, they’ll never have me as a client. Sleep with dogs, and you get fleas. I prefer to be parasite free.

      1. I agree. I was considering buying several Nest thermostats for the home. Not any more. I do what I can to be Google-free. Duck Duck Go for web searches, etc. We are being spied on enough as individuals. I do not need to give Google a 24/7 eye into my home.

    2. It is also possible that consumers were surveyed by Apple or their contractors and they found that consumers tend to buy thermostats from their electricians and furnace installers, where there are MANY choices.

      It could easily be that Apple sees a market to control home devices using bluetooth & WiFi, but wants more than just a thermostat.

      Apple may want to be the backbone for the home automation, rather than the maker of little low margin wireless light switches.

  3. Google bought Nest because they are interested in exploiting Tony’s corporate knowledge about programming small devices.

    3.2 billion for Nest is an unbelievably stupid decision and it was interesting the author contrasted this using the top 10 most expensive purchases by Apple ever, which amounted to 2.7 billion.

    And Google spends this much for the tech behind Nest in the hopes of turning it into some kind of hub to take control of your house while you’re away?

    No way. Right?

    1. Significantly Google has a desire to build upon Nest Labs knowledge base, which centre on designing, engineering and fabricating high quality products on a large scale.

    2. Undoubtedly true.

      40,000 Nest thermostats a month @ $250 is $120 million. Even at 40% profit, that’s $30 million. So paying 100x profit would be madness unless you have a wider strategy to build the “Internet of Things” and glue it all together using Google’s cloud-oriented view of the world.

      1. See? Even you think something stinks about this news. It doesn’t make sense unless Google is getting something besides Nest Labs.

        Perhaps Google is fishing for old iPod patents of Tony’s that could be used as chum?

        Even if it were to be used as a stall tactic to freeze the market, by invoking some ten-year old patent in his war chest that is irrelevant, but still useful as a tool at Google’s disposal in what appears to be an ever-growing war fought in the courts.

        1. I don’t think it stinks, I just think it’s indicative of the fact that we’re moving into the realisation of the IPv6 vision which will create an Oort Cloud of intelligent ‘things’ from door locks and lawn sprinklers to thermostats and parking bays.

          Google wants a piece of that pie and in fact needs a piece of that pie in order to allow Android to maintain a competitive presence.

          This deal really isn’t about Google or its advertising model; it’s just far more about buying a fully-formed ‘think tank’ (rather like Xerox PARC, but with more commercial focus) so that it can build out a device-oriented ecosystem where they can make Android the first platform for a whole load of devices and apps.

          Will it work? Don’t know. The problem that exists now is that nobody is going to join Nest in the hope of becoming a billionaire or even a significant millionaire – all of the entrepreneurial upside disappeared with this deal. So the only way to make a lot of money will be to create your own devices on the outside of Google empire and wait to be acquired by Google/Nest or Microsoft or Apple.

          1. Nope. I don’t buy it. Google has a think tank already and look at the results. The only money-making product Google ever made was their original product, AdWord.

            AdWord made them all rich and above the law. They pry into our lives, steal data and now the latest revelation is, Google Chrome can be used to listen on your conversations?

            Fuck Google and fuck anything they build.

  4. I’ve always understood apple to want to focus on making one good product, rather than making 20 crappy ones. Although, they definitely got the force and capital to take something like Nest under their wing, I don’t think they want to make that product. They being CEO and others officers. Something that has kind of been a nice surprise to see at apple recently is the amount of 3rd party creation coming into the stores. It started with the iPod stereos and since then has blossomed. There are door locks that now open when you walk close, lights that you can change hue on and turn off from 300 miles away, game controllers that you can play with on your iPad or iPhone, iPad driven guitar pedals with footswitches, and so much more in the future. If apple does anything, it is to make enough room in their stores to showcase these awesome products all the 3rd party developers are making…without becoming gigantic like best buy. keep it modest ya know.

  5. @ Next Apple WWDC:

    Tim: As you know we have more engineers than we have space in this venue. Another thing we are short on is time to cover all the products we have in our pipeline. But there is one product we will gladly sideline the next generation iPad or iPhone or ATV for. And that’s our next generation thermostat controller and CO monitor. So, please welcome Phil Schiller to talk about the long awaited revolutionary iThermostat.

    1. iServe will make Nest its bitch.

      This scenario will occur but it be for iServe.

      We’ll never see TV move beyond the “hobby” stage. It will be melded into the crown jewel, the grand central of the home, the iServe. Complete with TV tuner.

      “iServe” is a product of Steve Job’s vision for a computer in the home. Not a personal computer, but a home computer to govern your home.

      Apple’s iHome experience could be a reality; a home could exist already and periodically receives upgrades as they roll off the R&D line.

      The thermostat is a no-brainer, but Tony Fadell is still thinking small.

      There is a race to the living room but it won’t be through the heating vents.

  6. No. Since the real reason Fadell’s departure is his differing views for Apple’s design direction. Apple is on a roll and have established a unique design language that works and can’t afford to have TWO seemingly design heads to distract from that.

    Google’s intent isn’t smart ass thermostat, it’s invasion of privacy through it’s technology.

    Stay away.

  7. To me the most interesting here is, “Why would Google change spots and suddenly not mine the data of Nest’s current and future customers for maximum profit?”

  8. Does Google know the difference between millions and Billions? Here is a good way to remember the difference.

    It takes about one WEEK to count up to a million (at the rate of one count per second). To count up to a billion?………..30 YEARS!!!!

  9. Nest Labs made simple stuff simple. (unlike Sony and Olympus that made simple stuff complicated)

    When they make complicated stuff simple, then I’ll be impressed.

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