Why Google Can Pay Whatever It Wants

NEW YORK (TheStreet) -- When not talking about potential privacy issues, many analysts and commentators have been balking at the price Google (GOOG) paid for Nest. A whopping $3.2 billion in cash ain't cheap, after all.

But one thing not enough people are saying? Why not! Google ended last quarter with about $56.5 billion in cash. Even though the company is investing in research & development and its own growth, its $12 billion annual free cash flow generation still leaves a lot on the table.

What were the alternatives for Google? More buybacks? We see what that's done for IBM (IBM). Dividend? That's not why investors are in the stock. They want growth, and Google is making an informed bet on a growth area. And they have the liquidity to do so. Case in point? Amazon (AMZN), the quintessential loved 'stock of the future' continues to invest for future growth-- and investors continue to applaud these investments.

At the very least, and the acquisition means a lot more than just this, Google is bringing in Nest CEO Tony Fadell, who is known as one of the "fathers" of the iPod -- which of course started Apple's product rollout that led to years of outsized success. Interesting, as an aside, that Apple invested in the development in the iPod, first released in 2001, when worries abounded for the whole sector. Getting ahead means taking bets... and that is what Google is doing.

And no, Nest isn't some thermostat company. It could be the keys to the "connected home"-- something we know Apple has been after with the Apple TV but has failed to impress.

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