Thermostat War Heats Up as Honeywell Aims at Google

The thermostat war has spread beyond colleagues squabbling over the office temperature.

With Google Inc.’s Nest unit shaking up a once-staid market, Honeywell International Inc. is striking back with a Wi-Fi thermostat being introduced today and by working with Apple Inc. The Lyric can be controlled by a smartphone and has a sleek round look with a large digital display, similar to Nest’s.

Honeywell’s 39 percent share of U.S. thermostat sales in 2013 makes the company a target for rivals rushing out equipment promising energy savings, more comfort and less user confusion. The No. 2 competitor, Johnson Controls Inc., had 6.5 percent of the $3.1 billion in U.S. residential and industrial thermostat revenue, according to New York-based researcher IBISWorld Inc.

“Nest made the lowly thermostat something much more interesting,” said Neil Strother, an analyst with the research unit of Chicago-based Navigant Consulting Inc., which has studied the smart-thermostat business. “It’s not just a fuddy-duddy product now because it can connect.”

Honeywell has signed on to participate in Apple’s HomeKit, a platform unveiled last week to run home gadgets including locks and lights. The new Wi-Fi thermostats also will be part of a “family of products” under the Lyric brand, said Beth Wozniak, president of Honeywell’s Environmental and Combustion Controls unit.

“Our thought was that there are a lot of things Honeywell does in the home, let’s start to unify those experiences,” Wozniak said in an interview. The company doesn’t break out thermostat revenue from the unit’s $2.7 billion in 2013 sales.

Connected Homes

For Honeywell, there’s more at stake than thermostats. The Morris Township, New Jersey-based company makes smoke detectors, humidifiers, window sensors and other home devices that customers will be able to control remotely. All will face new competition in the era of connected homes. Nest has introduced an alarm for smoke and carbon monoxide; sales were suspended in April due to a recall.

Revenue for so-called smart thermostats is poised to outpace the rest of the market, which usually tracks home starts and the replacement of air-conditioning systems. Annual revenue in the segment will surge 16-fold to $1.4 billion in 2020, according to a report by Navigant.

Emerson Electric Co. announced a Wi-Fi thermostat called Sensi last month that will allow power usage to be monitored more closely.

‘Market Catalyst’

Nest was “the market catalyst” in triggering interest among non-traditional thermostat manufacturers because of its units’ connectivity, said Navigant’s Strother. Nest’s founder, Tony Fadell, was a collaborator with Apple’s Steve Jobs in creating the iPod and iPhone.

Honeywell came out swinging in 2012 with a lawsuit against Nest alleging that the startup had infringed on seven patents. Honeywell is “confident of our position,” said Bruce Anderson, a spokesman, who declined to comment further. Nest called the lawsuit “meritless allegations” in a 2012 statement and cited Richard Lutton Jr., the company’s general counsel, as saying the case was an attempt to stifle competition.

Google’s $3.2 billion purchase in February of Nest thrust the owner of the world’s biggest search engine into the digital home-automation market. Mountain View, California-based Google said it identified with Nest’s mission “to reinvent unloved but important devices in the home.”

The plan is to help Nest invest and reach a broader audience, then expand internationally, Google’s Chief Business Officer Nikesh Arora told analysts on a Jan. 30 call.

Apple’s foray into home automation may give Honeywell a lift. Cupertino, California-based Apple said June 2 its HomeKit will let customers tell an iPhone they’re going to bed -- turning off lights, locking doors and setting the thermostat. HomeKit participants include Kwikset locks and Philips Lighting.

Honeywell is banking on consumers staying loyal to a brand that’s in 150 million homes and sold through 90,000 contractors, Wozniak said. The Lyric’s $279 cost tops the Nest’s $249.

As for the Lyric’s circular look being similar to Nest’s: “Honeywell invented the round thermostat in the ’50s and now we’ve reinvented it,” she said.

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