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Nest CEO Out After Two Tumultuous Years at Google

June 6, 2016
“How does Nest come up with the next devices and get them to work well with its thermostat and other home devices, which often use different communications standards? They haven’t answered that yet.”

Tony Fadell is stepping down as head of Nest Labs, just over two years after selling the smart-home gadget maker to Google.

Fadell will leave Nest immediately and be replaced by Marwan Fawaz, former executive vice president of Motorola Mobility, where he served as CEO of Motorola Home, Nest said in a statement. Fadell will still advise Alphabet Inc. and Larry Page, the Google co-founder and CEO of the holding company.

The departure and the problems that precipitated it are a blow to Google, which purchased Nest in 2014 for $3.2 billion, its third-largest acquisition. The deal brought in a proven technology hardware executive to help the internet giant design better devices and integrate its web services deeper into people’s homes.

Nest became part of Alphabet’s new corporate structure, unveiled last summer, where independent businesses with their own CEOs were supposed to run more efficiently without involvement from the main Google internet operations.

In early 2015, Fadell’s star was rising at Google as he took on responsibility for hardware projects beyond Nest, such as the troubled Glass wearable computing effort.

But Nest took longer than expected to release new hardware products, and a smoke and carbon monoxide detector was recalled due to software problems. When the company did release an updated product, the Nest Cam security camera in June 2015, Fadell admitted it had been a “grueling” year.

In recent months, some Nest employees complained publicly about Fadell’s management, while claiming the business had missed sales targets, botched upgrades and delayed future products. (Other staff members spoke out in favor of Nest’s work culture).

The struggles show how difficult it has been for technology giants, like Alphabet, Apple Inc., Samsung Electronics Co., and Microsoft Corp., to develop hot-selling connected home devices. Nest made early headway with its smart thermostat, but later products have not been as popular. Inc.’s Echo voice-based search device has been a recent surprise hit, but that’s about it so far.

“How does Nest come up with the next devices and get them to work well with its thermostat and other home devices, which often use different communications standards? They haven’t answered that yet,” said Chris Jones, an analyst at technology research firm Canalys. “This is still a huge opportunity and maybe under new leadership they will have more success.”

Fawaz, Nest’s new CEO, has experience with connected devices and Internet infrastructure and services. He led Motorola Home from June 2012 to May 2013, when Google owned Motorola. That Motorola division, which then focused on broadband infrastructure, now makes connected security cameras, baby and pet monitors and modems for homes. His four years prior to that were spent as chief technology officer of Charter Communications, a cable and broadband provider. He has also advised companies working on internet-connected services, such as ADT Technologies.

Page said in a statement he was confident Fawaz can “deepen Nest’s partnerships, expand within enterprise channels, and bring Nest products to even more homes.”

Two signs of Nest’s potential: The company said its third-generation thermostat, introduced in September, reached 1 million units sold in half the time as the previous model. And since it started shipping products in October 2011, Nest has generated annual revenue growth of more than 50%, on average.

Fadell’s departure is an unceremonious dip in an otherwise successful career. The Silicon Valley executive was instrumental in the development of Apple’s iPod, helped design the iPhone, and started Nest in 2010 to modernize home gadgets before selling it to Google.

While conceding Nest could have shipped more products, Fadell said the business has generated strong revenue growth and has many new products and services coming. 

“I don’t know of any regrets that I have,” he said. “To do what we do at the level we do it, no one’s done it before. So you’re bound to make mistakes.”

Even as Fadell moves on, hardware remains an important component of Google’s ambitions, ranging from self-driving cars to robotics research to a growing suite of gadgets overseen by recent hire Rick Osterloh.

By Jack Clark

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