Google

The new GE: Google, everywhere

With a string of deals the internet giant has positioned itself to become a big inventor, and reinventor, of hardware Jan 18th 2014 | SA !"A #$S#% | !rom the print edition

AT GOOGLE they call it the toothbrush test. Shortly after returning to being the firms chief executive in 20 ! Larry "age sai# he $ante# it to #evelo% more services that everyone $oul# use at least t$ice a #ay! li&e a toothbrush. 'ts search engine an# its An#roi# o%erating system for mobile #evices %ass that test. (o$! $ith a string of recent ac)uisitions! Google seems to be %lanning to become as big in har#$are as it is in soft$are! #evelo%ing *toothbrush+ %ro#ucts in a variety of areas from robots to cars to #omestic,heating controls.

'ts latest %urchase is (est Labs! a ma&er of so%histicate# thermostats an# smo&e #etectors- on .anuary /th Google sai# it $oul# %ay 0/.2 billion in cash for the firm. Googles biggest move into har#$are so far is its 0 2.1 billion bi# for 2otorola 2obility! a han#set,ma&er! in 20 . 'n recent months it has been mo%%ing u% robotics firms 3see table4! most notably 5oston 6ynamics! $hich ma&es t$o, an# four,legge# machines $ith names li&e 5ig6og an# 7heetah that can $al& an# run. Googles in,house engineers have also been busy $or&ing on #riverless cars an# $earable ga#gets such as Google Glass. (est ta&es Google into the home,a%%liance business! $hich is ho$ another! much ol#er American conglomerate got starte#. General Electric 3GE4 %ro#uce# its first electric fans in the 890s an# then $ent on to #evelo% a full line of #omestic heating an# coo&ing #evices in 90:! before ex%an#ing into the in#ustrial an# financial behemoth that is still going strong to#ay. The common factor share# by GEs early %ro#ucts $as electricity! something businesses $ere then ;ust learning to ex%loit. <ith Googles collection of har#$are businesses! the common factor is #ata- gathering an# crunching them! to ma&e %hysical #evices more intelligent.

Even so! the )uestion is $hether Google can &nit the #iverse businesses it is #evelo%ing an# ac)uiring into an even more %rofitable engineering colossus=or $hether it is in #anger of s)uan#ering billions. 7oncern that the firm coul# ma&e over%rice# ac)uisitions has gro$n along $ith the si>e of its cash %ile! no$ aroun# 01: billion. Eyebro$s $ere raise# this $ee& $hen the %rice for (est $as reveale#. 2organ Stanley! a ban&! rec&ons it re%resents ten times (ests estimate# annual revenue. 3Googles executive chairman! Eric Schmi#t! is a non,executive #irector of The Economist Grou%.4 <hy for& out so much for a startu% that ma&es such banal things as thermostats? "aul Saffo of 6iscern Analytics! a research firm! argues that Google is alrea#y a#e%t at %rofiting from the #ata %eo%le generate in the form of search )ueries! e,mails an# other things they enter into com%uters. 't has been suc&ing in #ata from smart%hones an# tablet com%uters than&s to the success of An#roi#! an# a%%s such as Google 2a%s. To &ee% gro$ing! an# thus to ;ustify its shares lofty %rice,earnings ratio of //! it must fin# ever more #evices to fee# its hunger for #ata. "ac&e# $ith sensors an# soft$are that can! say! #etect that the house is em%ty an# turn #o$n the heating! (ests connecte# thermostats generate %lenty of #ata! $hich the firm ca%tures. Tony @a#ell! (ests boss! has often tal&e# about ho$ (est is $ell,%ositione# to %rofit from *the internet of things+=a $orl# in $hich all &in#s of #evices use a combination of soft$are! sensors an# $ireless connectivity to tal& to their o$ners an# one another. Other big technology firms are also ;oining the battle to #ominate the connecte# home. This month Samsung announce# a ne$ smart,home com%uting %latform that $ill let %eo%le control $ashing machines! televisions an# other #evices it ma&es from a single a%%. 2icrosoft! A%%le an# Ama>on $ere also ti%%e# to ta&e a lea# there! but Google $as until no$ seen as something of a laggar#. *' #ont thin& Google realise# ho$ fast the internet of things $oul# #evelo%!+ says Tim 5a;arin of 7reative Strategies! a consultancy. 5uying (est $ill allo$ it to lea%frog much of the o%%osition. 't also brings Google some stellar talent. 2r @a#ell! $ho le# the team that create# the i"o# $hile at A%%le! has a &nac& for breathing ne$ life into stale %ro#ucts. Ais s&ills an# those of fello$ A%%le alumni at (est coul# be hel%ful in other Google har#$are businesses! such as 2otorola 2obility. Google has sai# little about its %lans for its ne$ robotics businesses. 5ut it is li&ely to #o $hat it #i# $ith #riverless cars- ta&e a technology finance# by military contracts an# a#a%t it for the consumer mar&et. 'n future! %ersonal Googlebots coul# bu>> aroun# the house! tal&ing constantly to a (est home,automation %latform.

The challenge for 2r "age $ill be to ensure that these ne$ businesses ma&e the most of Googles im%ressive infrastructure $ithout being stifle# by the bureaucracy of an organisation that no$ has BC!000 em%loyees. Google has ha# to overcome sclerosis before. Soon after returning as boss! 2r "age axe# various %ro;ects an# streamline# the management.

(est is being allo$e# to &ee% its se%arate i#entity an# offices! $ith 2r @a#ell re%orting #irectly to 2r "age. Google has also %rotecte# its in,house har#$are %ro;ects! such as Google Glass an# self, #riving cars! from succumbing to cor%orate inertia by nurturing them in its secretive Google D #evelo%ment lab. 't has also given its most im%ortant %ro;ects high,%rofile bosses $ith the clout to cham%ion them internally. The ne$ hea# of Googles robotics business is An#y Eubin! $ho le# the successful #evelo%ment of An#roi#. Such tactics are goo# $ays to avoi# the %itfalls of conglomeration. 5ut to ensure success! Google $ill nee# to avoi# another misste%. 'ts che)uere# recor# on #ata,%rivacy issues means that (est an# other #ivisions $ill be sub;ect to intense scrutiny by %rivacy activists an# regulators. "rovi#e# it can retain the confi#ence of its users on this! Google shoul# be able to fin# %lenty of ne$ o%%ortunities in both soft$are an# har#$are that %ass the toothbrush test an# &ee% a bright smile on its sharehol#ers faces. @rom the %rint e#ition- 5usiness