Google's holding company Alphabet is to merge its smart home subsidiary Nest into Google in a bid to make up lost ground in the market for home automation products and services.
Previously, Nest had been run as a separate subsidiary under Alphabet. But Google's own hardware line-up, including the Pixel smartphone range and Google Home speakers, have faced intensive competition from Apple and Amazon, respectively.
It has been rumoured for a number of months, now, that a merger was on the cards.
There's no question that this is a direct response to Amazon's success in pushing its all-hearing Alexa smart speakers into the home. Alexa's success has been bolstered by home hub functionality from Zigbee and more recent models carrying screens, something that Google has yet to offer, aside from tight integration with Chromecast.
But it's open to question what practical difference this merger will merging Nest into Google actually make to customers? While the Google Home assistant and Nest already work together, Google will be looking to build its AI helper directly into Nest's cameras and thermostats.
With Alexa coming to Windows and Apple joining the race with its expensive HomePod device, Google needs to do everything it can to avoid falling further behind.
One of the key bonuses could be a unified approach to putting AI into products, with all devices working off the same technology and being developed (and working) in tandem.
But from a business perspective, Nest is being merged with Google, the only other part of Alphabet that currently makes money. And sure, that's fine, but it does somewhat devalue the whole Alphabet structure created in 2015.
That was to more clearly show which parts of the sprawling empire made money (Google) and which didn't (everything else).
By offering an ecosystem that works closely not only with its various constituent parts, but with the world's biggest mobile operating system, seamlessly, it will send a message to Amazon that the fight is far from over.
However, Nest products are somewhat pricey compared to Amazon's loss-leader approach to hardware, which has proved so successful in attracting customers to its Fire range of tablets and the Alexa home speaker.
Google may have to adopt a similar approach to gain more traction - although merging Nest with Google may also obscure the losses it would almost certainly incur from such a strategy.
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