Google Inc. (GOOGL) owned Nest Labs, a home automation company, recently entered into a definitive agreement to acquire Dropcam, a video-monitoring and Internet home security camera maker for $555 million in cash, as reported by Recode and The Wall Street Journal.
Following the deal, Nest will integrate Dropcam’s business into its existing portfolio of smart-home products, which at present includes Internet-connected thermostats and smoke detectors. Moreover, Dropcam’s staff will join Nest’s office. Nest will also gain access to the customer database for Dropcam's products.
This move will extend Nest’s footprint into home security and video monitoring, thereby helping it to accelerate its push into web connected homes. This adds to Google’s existing efforts in the consumer appliances industry and that too at a time when consumer appliances and Internet services are getting interconnected. It is also expected to provide a boost to Google’s profitability going forward.
The home monitoring market is a very attractive segment and technology companies are swarming to it. Apple (AAPL) recently launched its own HomeKit development tool to allow users to wirelessly manage devices at home with the help of a single app. Moreover, iPhone users can also manage lighting, door locks, garage door openers, heating and air conditioning.
Dropcam, founded in 2009, sells web connected cameras that provide home monitoring services as well as an optional cloud recording service. It allows users to track their home activity through motion sensors and live video streaming. The service also sends notifications to users’ smart phones while they are away from home.
However, the acquisition will likely raise privacy concerns, considering that Nest is now owned by Google. Nest has assured that Dropcam’s data will be kept separate from Google.
Google acquired Nest Labs for $3.2 billion in cash earlier this year, in a bid to get a foothold in the home market. Nest Labs designs and manufactures sensor-driven, Wi-Fi-enabled, self-learning, programmable thermostats and smoke detectors. It was co-founded by former Appleengineers Tony Fadell and Matt Rogers in 2010. Nest Labs was the second largest deal in Google’s history after the 2012 acquisition of Motorola.
Google has been exploring various ways to diversify its revenue base and counter competition from the likes of Facebook (FB) and Yahoo (YHOO). The company has been extending its foothold in new areas ranging from high-speed Internet access to advanced research on self-driving cars and robotics. Acquisitions have been a key tool to accomplish its goal of increasing the demand for its web features.
Some of its recent acquisitions include MDialog Corp., a video-advertising company, to bolster its advertising business and wireless-communications startup Alpental Technologies Inc. to enhance its wireless business.
Google currently holds a Zacks Rank #2 (Buy).
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