Google founders turn to familiar face to run Nest as Fadell departs

Fadell's exit not entirely surprising: Recode

For the second time in four years, the Google founders have turned to a particular cable industry veteran to help deal with upheaval at a recently acquired business.

Marwan Fawaz, a former top executive at Charter Communications and Adelphia Communications, has been tapped to run Nest Labs, the connected thermostat company that Google bought in 2014. Nest Founder and CEO Tony Fadell is leaving.

The last time Google called on Fawaz was in 2012, when the Internet giant needed to figure out what to do with the Motorola Mobility business it had purchased for more than $12 billion the prior year.

Tony Fadell
Dropcam founder slams Nest CEO Tony Fadell

Fawaz did the job. After Google determined it wanted no part of a massive manufacturing company, Fawaz sold off the set-top box unit of Motorola (the piece he was managing) to Arris for $2.35 billion.

His new gig comes with a different kind of drama. Google's parent Alphabet says it wants to keep and expand Nest, but the fledgling unit is rife with challenges.

Among Alphabet's "other bets," Nest is one of the few that generates real revenue. In Alphabet's first-quarter earnings report, the company said non-core businesses contributed $166 million in sales, and Nest was one of three units mentioned, along with Fiber and the health division Verily.

Alphabet's Tony Fadell stepping down from Nest

"Nest products are best-sellers in the category," Chief Financial Officer Ruth Porat said on the April 21 earnings call. "It's a leading brand in the connected home. It's obviously early, but a very exciting category." Alphabet CEO Larry Page said in a statement that Nest's revenue has increased more than 50 percent annually under Fadell.

For the $3.2 billion that Google spent on Nest, more is expected, said Tom Kerber, director of research at Parks Associates.

Nest has struggled in its global expansion plans, namely into Europe, and has failed to get another product to market outside of its thermostat and smoke alarm.

"There were expectations that certainly with $3.2 billion, they ought to be able to launch another product," said Kerber, who's based in Dallas. To justify that price, it can't be "just a thermostat company. It needs to be much more than that," he said.

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Problems at Nest run much deeper than products.

Talent has been flying out the door, and there's been a flood of criticism directed toward Fadell, who previously oversaw Apple's iPod development.

On the call, Porat was responding to a question from an analyst who was curious about Nest's performance due to an "unusual amount of press."

Much of the trouble has been tied to a culture clash between Nest and Dropcam, the connected camera company that Nest bought for $555 million in mid-2014.

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In a March story published by The Information, Fadell is quoted as saying many Dropcam employees "were not as good as we hoped."

Dropcam Founder Greg Duffy, who left the company last year, took exception.

"The ~50 Dropcam employees who resigned did so because they felt their ability to build great products being totally crushed," Duffy wrote in a March 29 blog post.

Fadell said in a post on Friday announcing the news that he'd been planning his departure with management since late last year. About handing leadership over to Fawaz, he said:

"Marwan's extensive technology and engineering knowledge, his experience with global service providers, as well as his background in connected home platforms will be valuable in continuing our trajectory, especially in scaling the business, working with our partners, and supporting our enterprise channels."

Nest Thermostat
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And in a statement, Fadell said Fawaz is taking over with a "two-year roadmap in place."

Since 2014, Fawaz has served as managing director of Sarepta Advisors, a technology consulting firm in Denver. He's on the board of Synacor and recently joined the board of CSG International, a billing and customer care company.

Alphabet is surely hoping Fawaz can bring some maturity to Nest's leadership team and ultimately some new business deals that have been sorely lacking.

Page said in his statement Friday that he is "confident in [Fawaz's] ability to deepen Nest's partnerships, expand within enterprise channels, and bring Nest products to even more homes."

Updates story from Friday to include Nest's growth rate.