It looks like Google Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL)’s recent acquisition Nest Labs will be doing some acquiring of it’s own. Last Friday (June 20th), Nest Labs announced it had signed a deal to buy out connected camera maker Dropcam for $555 million.

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Goldman Sachs Equity Research published a company update on Google on Monday, June 23rd, following the acquisition announcement. Goldman Sachs analysts Heather Bellini and colleagues view the deal as a good strategic fit for Google/Nest Labs. “We see the acquisition as adding strategic value to Google’s broad array of Internet of Things (IoT) initiatives.”

Solidifying Google’s IoT initiatives

Google Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) has clearly decided it wants to be a major player in the nascent, but potentially revolutionary Internet of Things. Google’s IoT initiatives are to date primarily focused on home security and automation, but the tech titan also has its finger in the pie in a few related segments. Media and analyst attention to the subject has been drawn by the company’s more than $3 billion acquisition of Nest Labs earlier this year.

The GS analysts argue Dropcam is an ideal fit for Google Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL)’s ongoing Iot initiatives. “In our view, the acquisition of connected camera maker Dropcam further solidifies the company’s IoT home security and automation positioning.”

Bellini et al. also expect Google to emerge as a leader in new areas such as smart watches and transportation. They point to Google’s significant investment in the development of self-driving cars, as well as Google Glass, as area where the company is “a pioneer”.

The report also highlights that the tech titan is likely to be a player in the area of smart watches with the Android operating system enabling vertical specific applications in the area of health and fitness among others. The GS analysts also point to Google Now as “a horizontal application that can be leveraged to help manage and connect all of these devices to each other.”

Google rated Neutral

Goldman Sachs Equity Research currently rates Google Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) as Neutral, and maintains a price target of $600 on shares of the stock.