Google may absorb Nest Labs into its hardware division as part of a move to intensify its hardware ambitions, Wall Street Journal reported on Thursday, citing sources with knowledge of the matter. The Mountain View, California-based tech giant still didn't make any concrete decisions and remains in the process of considering a reunion with Nest which it spun off in 2015 following its restructuring that saw it adopt a holding company structure and incorporate itself under Alphabet's umbrella. While the close proximity of two moves may be interpreted as a lack of long-term corporate strategy on Alphabet's part, insiders claim the decision was prompted by Amazon's recent push into the home security market with the launch of the Cloud Cam and related services such as Amazon Key.
Some former Nest officials quoted by WSJ believe a reunion of Google and the home automation firm not only makes perfect sense even without competition from Amazon but suggest the two never should have split in the first place. In regards to both sales and marketings, Google and Nest are said to rely on the same retailers, whereas their hardware efforts are also significantly overlapping. Furthermore, as Nest is seeking to become more competitive in the growing home automation market, one of its most logical moves is tighter integration with Google's ubiquitous services like Android and the Google Assistant, and consolidating the two would allow them to achieve that goal more easily, some insiders say. A merger would also remove Nest from Alphabet's Other Bets, a classification the conglomerate uses to label its high-risk business endeavors that are yet to become profitable and are usually just a hole in its accounting books.
Nest remains Google's second largest acquisition to date, with the Internet juggernaut paying $3.2 billion for the Palo Alto-based startup in 2014. The home automation company remained largely autonomous following the deal and while some speculation about Google selling it off surfaced after a few years, no such plans were ever confirmed as being in the works. The two are already said to have started collaborating more closely over the course of this year after their supply units were merged and some employees moved back and forth between Nest and Google, possibly paving the way for a formal merger. Absorbing Nest would also solidify Google's hardware ambitions that have been intensifying in the last several years and recently culminated with a $1.1 billion purchase of some of HTC's engineering talent. It's currently unclear whether Google attached a deadline to its decision on whether to officially join forces with Nest.