Why Apple didn't buy Nest

Some thought that if the smart thermostat maker was ever bought out, it would be a homecoming for co-founders Tony Fadell and Matt Rogers back to Cupertino. So much for assuming.

Lindsey Turrentine/CNET
Google on Monday said it had acquired smart-thermostat maker Nest for an eye-popping $3.2 billion, an announcement that may have confounded people who have followed the coveted startup's history.

But another look suggests that perhaps we shouldn't have been so surprised after all.

The company was founded by two ex-Apple employees, Tony Fadell and Matt Rogers. Fadell, Nest's CEO, is known as the father of the iPod, for having led the original development team for the product that changed Apple's fortunes at the beginning of the millennium. The Nest thermostat is even sold at the Apple Store.

So it's only natural to wonder if Apple may have launched a pre-emptive bid to reclaim its two long lost sons and their growing smart home product line. (A report by Re/Code, citing an unnamed source, says that Apple was not in the mix and that Google was the only serious bidder.)

So either Apple never made a bid at all, or not one that was interesting enough to Fadell and Co. Or maybe the two companies were in talks, but the conversations never reached the point of of anything real. Or it could be that Apple did make a respectable bid, but for one reason or another wasn't a serious exit candidate for Nest. (Apple would never publicly comment on its acquisition strategies, but just for the sake of trying, we asked anyway. We'll update this post if we hear back.)

But if Nest was never really on Apple's wish list, why not?

"Nest is about design," said Jonathan Gaw, an analyst at IDC, a research firm. "The technology is nice, but it's not necessarily groundbreaking. If you're Apple, you're thinking, 'Well, I've got design.'"

That doesn't mean Apple isn't thinking about the "Internet of Things," the buzz-tastic phrase used to refer to everyday appliances and devices that are connected to the Web. Gaw still thinks one of Apple's next products will have an element of home automation to it. Sure, Apple would like to get a good foothold in the market, but it's never really been the company's style to buy a company with an end product -- and what's more, leave it intact and independent, like Google has pledged to do with Nest. "I would be surprised if Apple made a multibillion-dollar offer on a device company," he said. Google, on the other hand, has made these kinds of buys before, like with its purchase of Motorola Mobility in 2012 for $12.5 billion.

Said Gaw: "Google needs Nest more than Apple needs Nest."

There's another reason Apple is usually dissuaded by the big, glitzy purchase. The company fanatically values secrecy. That's been relaxed a bit since Steve Jobs died, but the element of showmanship's surprise is still injected into the company's DNA. A big purchase like that tips the company's hand, and Apple wouldn't make the buy unless it absolutely had to, for things like key intellectual property or a talent grab, said Chuck Jones, founder of technology research firm Sand Hill Insights. He thinks a more likely Internet of Things buy for Apple would be in the wearables category, for technology like that of, say, the fitness tracker Fitbit.

As for the ongoing battle between Apple and Google, it's still an arms race. The two companies have duked it out over startups in the past. Notably, Google snagged Waze, the social-mapping company that Apple was also in talks with, for nearly a billion dollars. There's talk around Silicon Valley that Apple has been feeling more acquisitive these days. But, again, Apple is more at home with software purchases. Indeed, the company's more recent acquisitions reportedly include photo app developer Snappylabs and the social analytics company Topsy .

 

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