The Google-Nest Deal Is Huge

 | Jan 14, 2014 | 6:10 AM EST  | Comments
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How good is this Google (GOOG) purchase? How meaningful is the deal to buy Nest? Judging by Frank Blake, the CEO of Home Depot (HD), it's huge.

Here's why I write that. Not that long ago, Frank came on Mad Money, and I was pressing him about how he could still grow sales without upping the store count as well. Home Depot, after all, is building only one new store in the country this year, in Williston, N.D., to take advantage of the Bakken boom. Frank discussed improving internal store efficiencies and, beyond that, in the segment he also extrapolated on the new products Home Depot is offering -- products that people really want.

What's an example of that? One that Blake talked about was a smart smoke detector that doesn't screech out some annoying sound but, rather, gives you a soothing voice that tells you something's wrong. That smoke detector doesn't chirp in the night when the battery dies, either, and it doesn't make you guess which one it is, because it simply responds to the wave of your hand and stops chirping.

Not long before that interview, I had gone through one of those sleepless nights because I had had a bout with a chirper. I've nine smoke detectors around the first and second floor, and when one of the batteries dies, I can never for the life of me figure out which one it is. So I go from detector to detector trying to figure out if that's the one with the battery ready to be changed. You have about a minute between each, and unless you are underneath it, you can't be sure which one it is. Yes, I know there's supposed to be some light flashing that tells you it's the one. I don't know about you, but that just doesn't help me. Fifteen minutes later, amid a lot of pulled wires and batteries, you just give up and try to go back to sleep.

In other words, I could see how people would be clamoring for the product, and that's just what Blake said was happening.

Last night we learned that Google's executives felt the same way that Blake did, and shelled out $3 billion for this revolutionary product and its sister, the smart thermostat.

Now, lots of people have been talking about a thermostat that's linked to your personal computer or to a device that allows you to control it remotely. Similarly, others have tried to link your home-security system. These are all part and parcel with the notion that you want control over your house in order to know what's going on when you are away, that you want to be able to get in without fumbling with keys and to be able to control the temperature and, therefore, your heating bill.

I was quite taken, for example, by ADT's (ADT) pulse system, which allows you to remotely control your fire-monitoring and your burglary protection. However, we know that AT&T (T) is also getting into that game and can afford to undercut ADT. This is one of the reasons why that stock has been such a dog.

I know, also, that Con Edison (ED) has a device made by Honeywell (HON) that it gives away with free installation -- which is rather unbeatable vs. installing an expensive Nest thermostat yourself. If that catches on, I don't know a soul who would pay for a Nest thermostat, and Google will surely have overpaid, at least for that portion.

Still, the fact remains that Google is buying a device that captures still one more aspect of the Internet in a way that makes your handheld device more valuable. The move shows that the company truly understands the psyche of the consumer: That is, anything that makes the consumer more connected to her device and the Internet with a Google interface has to be considered a win. That's especially considering that the most important do-it-yourself home retailer has already said that the customers can't get enough Nest smoke detectors.

What can I say? It's certainly a better use than Google's going to get from keeping the cash in the bank, and if it's part of a better mousetrap that drives you to a Google-powered device, then it is most definitely a win.

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