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Employees are flying away from Nest, the smart home device maker that was acquired by Google for $3.2 billion in 2014 to compete with Apple ( AAPL ) in that growing market, but which isn’t generating the revenue that Google parent company Alphabet ( GOOGL ) had expected. A Re/Code report Thursday said that Nest’s initial three-year budget will run out at the end of 2016 unless Alphabet agrees to continue funding its Internet-connected home device division, and employees are nearing the point when their stock vests, meaning those workers will be able to finally cash in their shares. “Once the vesting period sunsets, some key executives could feel free to depart, something that several people close to the company said is very possible given the growing crisis,” said Re/Code . Nest’s original budget was around $500 million annually, the report said, and Nest’s revenue has fallen short of expectations. According to Re/Code, the company generated $340 million in revenue in 2015 — far below Wall Street estimates, which projected $400 million to $672 million in revenue. While Nest beat the $300 million internal sales target that Google set for the company when it was acquired, it made its numbers only by acquiring security camera maker Dropcam, according to the report. At a November meeting for engineers at Nest’s Palo Alto, Calif., headquarters, the company’s co-founder Matt Rogers said he was “losing sleep” over an exodus of staffers—roughly 70 in about six to 12 months, out of its workforce of roughly 1,000, according to a report in The Information last week. Nest CEO Tony Fadell allegedly pointed out that many of those departing employees had come from either Google or from Dropcam, which Nest bought in mid-2014. According to Business Insider, Fadell went on to say that about half of Dropcam’s 100 employees had left and that “a lot of the employees were not as good as we hoped. … Unfortunately, it wasn’t a very experienced team .” Alphabet’s executives have repeatedly said they intend to hold the lid on spending by the company’s speculative “moonshot” companies, a wide-ranging group that includes Nest. Alphabet, created last year as the parent company for Google and non-core businesses, broke out financials for its non-core ‘Other Bets’ long-shot subsidiaries for the first time in Q4, showing they lost $3.57 billion as a group in 2015, up from a $1.94 billion loss in 2014. Google’s ‘Other Bets’ segment posted revenue of $448 million in 2015, up 37% year over year, with the majority of revenue generated by the company’s smart home device group Nest, its fast Internet service Google Fiber and its health segment Verily, Alphabet and Google CFO Ruth Porat said on the company’s earnings conference call with analysts in February. Nest’s smart thermostat is its flagship product, while the company also earns revenue from its energy partnerships with utility companies. Nest also sells its Protect smoke detector and Nest Cam, the home-monitoring video successor to Dropcam. Other products, primarily in home security, have long been in the works, Re/Code said . Alphabet stock was down a fraction in midday trading in the stock market today , near 763. Apple stock was also flat, near 109. Scalper1 News
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