A New Player in Our Industry: Google (Alphabet holding company)
Feb 26 2016
Paul Eitmant
Google has closed the books on its US$3.2 billion purchase of Nest Labs. We are all used to acquisitions (manufacturers and distributors) within our industry over the last few decades. However, this one caught my attention for a lot of different reasons.
In a filing with the Securities and Exchange Commission, the search giant said that the deal closed on February 7, 2016, Google revealed that it would acquire the maker of the Learning Thermostat and the Protect smoke and carbon monoxide detector as part of its goal to make its mark in smart-home systems.
Photo courtesy: www.sumago.de
In January 2014, Google entered into an agreement to acquire 100% of Nest Labs, Inc. (Nest), a company whose mission is to reinvent devices in the home such as thermostats, smoke/CO alarms and security cameras for a total purchase price of US$3.2 billion in cash, subject to adjustments. Prior to this transaction, Google had an approximate 12% ownership interest in Nest, which was net against the total consideration.
Google’s sales since 2011 went from US$24 billion to US$73 billion in 2015. At the same time net Income went from US$9.7 billion to US$16.3 billion. I do not know another company in the electrical industry that can match these numbers.
On August 15, 2015, Google made a huge announcement, turning itself into a subsidiary of a new holding company called “Alphabet.”
Under the new structure, Alphabet will basically have two major entities comprising Google’s core business (such as search, ads, and maps) and other units (Calico, Nest, and investing arms).
But why the name Alphabet for what is supposed to be the parent company overseeing the entire operations of Google?
Larry Page, who will now be CEO of Alphabet, explained in the blog post announcing the new structure:
“We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search! We also like that it means alpha‑bet (Alpha is investment return above benchmark), which we strive for!”
Page added that the goal is not to be a big consumer brand with a bunch of related products. “The whole point is that Alphabet companies should have independence and develop their own brands,” he wrote.
Considering the above actions, listed below are the major reasons why Google will be an interesting company to watch as it makes an impact in the electrical industry:
• Google was founded on February 4, 1998 by Larry Page and Sergey Brin, and has since grown to US$73 billion in 2015 with net income of US$16.3 for the same time period. A true success story.
• Google is entering one of the fastest growing market segments (energy management) in the electrical industry.
• Google has its finger on social media, which is every growing buying influence in our industry.
• Google success with YouTube is another success story unto itself.
• Google has cash and time on their side and they know how to invest/focus on new technology product development.
• Google management teams are young and aggressive Millennials who continue to “think out of the box” something that our industry is starting to do. Google has a head start.
• Google has an in-house database of end users that they use to understand the ever-changing demands of next generation homebuyers and young executives in the commercial/industrial marketplace.
• Google is a true believer in the open protocol Wi-Fi market place.
In the past few months I have seen the Next product lines in the Big Box channel of distribution, TV ads and more importantly online pop up ads. I know there will be some disbelievers who will not consider Google as a threat, but I can only state that this is the next generation of companies that will make an impact on our changing industry. Bottom line: pay attention to how they grow over the next few years. You could actually learn something in how to capture sales and profits for your company.
Read more from Paul Eitmant in CEW:
– The Biggest Risks to Canada’s Economy In 2015 and Beyond
– Networks and Lighting Standards – Follow Up – One Year later
– How Healthy is Your Business?
– Social Media: Is It the Future for the Electrical Industry?
– Customer Service: A Key to Success
– The Right Price to Get the Order — the Last Look
– The Good Old Boys Club “Changing of the Guard”
– Who’s Next Within North America’s Electrical Distributor Channel?
– Generation Y – Next Generation – Never to old to Learn!
– LEDs: the Fastest Growing Product/Market for 2015
Paul Eitmant is President and CEO of IP Group International, which serves the needs of business-to-business enterprises in over 30 countries worldwide by adding specialized expertise to the business planning and implementation process; Tel: 480.488.5646; paulipgroup@cox.net.
