Honeywell to Spin Off Quantum Unit in Merger With Software Firm
(Bloomberg) -- Honeywell International Inc. plans to spin off its quantum computing business and merge it with a software firm to form a new company that is likely to trade publicly.
Honeywell will own a 54% stake of the venture after combining the business with Cambridge Quantum Computing Ltd., a London-based specialized software firm that will own the remaining 46%. Honeywell has committed to investing up to $300 million in the company, which may seek to sell shares to the public, said Tony Uttley, who heads Honeywell’s quantum computing business and will be president of the new entity.
“We are setting up this company to accelerate. This is truly about hyper-scaling,” Uttley said in an interview Tuesday. “You put the capital in now and grow massively.”
Shares of Honeywell rose 0.9% to $230.19 as of 12:52 p.m. in New York. The stock is up about 8.2% this year.
Honeywell scientists have been working to build a quantum computer, which could be vastly more powerful than traditional computers, for about a decade with tools from its energy and aerospace units. The effort has thrown Honeywell’s hat in the ring to be among the first to build a practical quantum computer, a race pitting it against a number of startups and tech giants including International Business Machines Corp. and Alphabet Inc.’s Google.
Honeywell insists the spinoff is designed to capture investors that want to invest early in a quantum-computing venture that’s part of an industry that could grow to $1 trillion in sales over the next three decades as the technology improves. Those investors aren’t necessarily the same set that holds Honeywell shares, Uttley said. Still, while the spinoff lowers the risks for Honeywell if the project doesn’t pan out, the move also reduces the upside if the quantum-computing business takes off as promised.
Chief Executive Officer Darius Adamczyk, who has been driving Honeywell to boost profits by incorporating more software in the aerospace, automation, natural-gas processing and other products it sells, said in a March webcast that Honeywell’s quantum computing business could be worth $150 billion within a decade.
“The new company will provide the best avenue for us to onboard new, diverse sources of capital at scale that will help drive rapid growth,” Adamczyk, who will be chairman of the new entity, said in a statement.
Quantum computing is based on the physics of atomic particles, which can be in multiple states at once. Conventional computers depend on electric currents being switched to either on or off, with those states represented by a “1” or a “0.” Quantum computers use units known as quantum bits, or qubits, which can represent all states between “0” and a “1” at the same time, increasing the computing power exponentially.
Generally, quantum computers look at all the different combinations of data simultaneously, while classical computers work sequentially, making them much slower when dealing with large sets of variables. Honeywell has based its technology on manipulating real atoms, while IBM and Google are using simulated atomic particles. All the machines are clunky at this stage of development and create so many errors that they’re not yet ready for day-to-day practical use.
Skeptics see those problems taking years to overcome, if at all.
Cambridge Quantum Computing has been writing software on behalf of clients for Honeywell’s early-stage computers and plans to continue working with other makers of quantum computers, including Google and IBM, after the merger, said Ilyas Khan, who will be CEO of the spinoff. Companies including JPMorgan Chase & Co. and Merck & Co., have been experimenting with Honeywell’s machine.
The combination is expected to be completed in the third quarter of this year.
“In the very short term, we certainly are going to be looking at a greater investor participation in this company,” Khan said in an interview. “A public listing is a very real possibility.”
The new company, which hasn’t been named yet, will contract with Honeywell’s aerospace unit to continue doing foundry work and other activities to build the new generations of quantum computers that have been mapped out, Uttley said. Honeywell will also become a large customer of the new company, he said.
©2021 Bloomberg L.P.