Alphabet enters lower price point to boost Nest sales
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Alphabet enters lower price point to boost Nest sales

Nest, the connected home company owned by Alphabet, is introducing a lower-priced version of its digital thermostat. The new model, Thermostat E, costs $170 – that’s $80 less than the current version – and is designed to spur sales in an increasingly competitive marketplace. Functionally, the product will be almost identical to its more expensive predecessor, meaning it adapts to conditions and use automatically, and is accessible via users’ smartphones. The cost cutting has been superficial: a plastic, rather than metal, edge on the housing and fewer colours on the display.

Alphabet’s share price has outperformed the market this year so far

 alphabet graph 010917

Source: Yahoo Finance

Google acquired Nest in 2014 for the princely sum of $3.2 billion. It was founded as a long-term prospect to become the leading operating system for the connected home. This year, however, the goal has been to popularize the software through sales of the hardware. To that end, Nest is working on a number of products, like a home security system and a doorbell with built-in video camera, which should get to market next year.

This year, the Thermostat E is Nest’s second launch, having been preceeded by the Nest Cam IQ – an indoor security camera that records high-resolution video and senses when people enter the field of view. As big names like Amazon and Apple make headway in the connected home market – and startups like Otto join them – Alphabet is hoping that Nest’s new products will put it ahead of the game. And there’s good reason for that: by 2023, researchers at MarketsandMarkets predict that these appliances will be worth nearly $140 billion.

Disclosure
Dominion holds Alphabet in its Global Trends Ecommerce Fund.


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