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Google’s Nest Labs Acquisition is a Smart Defensive Move

Posted By Barry Ritholtz On January 22, 2014 @ 7:55 am In M&A,Technology | 13 Comments

I have been thinking about Google’s acquisition [1] of Next Lab’s last week for the eye-popping sum of $3.2 billion dollars. There have been numerous criticisms of the acquisition in terms of cost, with some chatter of this as evidence of a bubble in Silicon Valley. Perhaps it is worth considering this from a different perspective.

If we look at some of the biggest tech errors of the past decade, we see a very specific risk arising from new technologies to existing companies. The two that come to mind are Blackberry ignoring the threat from touch screen smart phones (Apple iPhone) and Microsoft ignoring the tablet as a threat to their basic Windows/PC business (Apple iPad).

Note that Google’s Android acquisition allowed the company to be stay competitive with Apple’s disruptive technologies – even as the two previous leaders fell dramatically from their prior number one spots. Android phones are ahead in market share (but not profitability) versus the iPhone; Android tablets are the default alternative to iPads. Blackberry saw its market share plummet. Microsoft is encountering a seismic shift in PC sales.

continues here [2]


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URL to article: http://www.ritholtz.com/blog/2014/01/googles-nest-labs-acquisition-is-a-smart-defensive-move/

URLs in this post:

[1] Google’s acquisition: https://investor.google.com/releases/2014/0113.html

[2] continues here: http://www.bloomberg.com/news/2014-01-22/google-plays-smart-defense-by-buying-nest.html

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