Staff Outflow Fears Grow At Alphabet Inc (NASDAQ:GOOG)’s Home Automation Arm Nest


Alphabet Inc (NASDAQ:GOOG) may soon have too little to show for its $3.2 billion acquisition of Nest Labs, a unit it has recently focused on the home automation market. It turns out that a growing number of current Nest employees are plotting their exit. What has been keeping some of them around is their vested stock, but those stock vesting schedules are due to expire, thus raising fears that the home automation oriented company could face more challenges in the near future.

Various media reports have recently surfaced about troubles at Alphabet Inc (NASDAQ:GOOG)’s Nest, but it seems things are only beginning to unfold. Interviews with current and former employees of Nest reveal growing frustration with the leadership of the unit’s CEO, Tony Fadell.

It is not exactly clear what problems Fadell is causing his colleagues, but there must be something they don’t like about the direction he is taking the company.

Things could get worse for Nest because some of the early measures to provide it with financial security are set to reach their limits by the end of this year, yet Nest is not already generating enough money to guarantee its survival.

$500 million financial cushion

At the time of acquisition and subsequent integration, Nest negotiated for operating financial security to the tune of $500 million a year. Alphabet Inc (NASDAQ:GOOG), then Google, was to back-stop for Nest for three years. That deal is in its final year and will soon expire.

The other development that could fuel staff outflow from Nest is the expiration of stock vests. Alphabet Inc (NASDAQ:GOOG) used stock vesting measure as a way to keep Nest talents around for a while after it acquired the startup for $3.2 billion in 2013.

Revenue misses target

Nest’s revenues are also not increasing quickly enough. The company’s 2015 revenue figure of $340 million may have met internal sales target, but fell sharply below Wall Street estimate. Analysts on the average expected Nest to post 2015 revenue in the band of 400 to 672 million.

With Nest nearing the end of its three-year financial cushion and revenue not growing at a decent rate, uncertainties have only increased for the company.

Home automation industry

Alphabet Inc (NASDAQ:GOOG)’s Nest is becoming bad news just when the home automation market is beginning to heat up. Amazon.com, Inc. (NASDAQ:AMZN) has recently been seen taking an early commanding lead, especially boosted by its Echo line of automation hubs.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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