Honeywell’s Quantum-Computing Business Could Be Worth $20 Billion

In the ever-evolving landscape of quantum computing, Honeywell International Inc.’s subsidiary, Quantinuum, is emerging as a formidable player. Amid speculation surrounding a potential breakup of the industrial conglomerate following pressure from the $5 billion stakeholder Elliott Management, analysts are highlighting Quantinuum as a significant asset. According to Wolfe Research analyst Nigel Coe, Quantinuum’s value could soar to approximately $20 billion, mirroring the recent successes of other quantum-computing firms.

Pressure for Change at Honeywell

On Monday, Honeywell’s management announced intentions to consider breaking up the company, primarily focusing on its expansive aerospace unit. This strategic shift has ignited discussions regarding the company’s various segments, especially its commitment to monetizing its quantum-computing business, Quantinuum. Bloomberg reported in July that Honeywell has been contemplating an initial public offering (IPO) for Quantinuum, signaling the firm’s ambition to capitalize on the growing interest and investment in quantum technology.

A Bright Spot in Quantum Computing

Interestingly, while Honeywell has faced challenges, analysts remain optimistic about Quantinuum’s growth trajectory. Coe pointed out that the Honeywell unit offers a comparable business model to another quantum-computing company, IonQ Inc. (IONQ). This company has experienced an astonishing 226% increase in its stock price in 2023, reflecting the heightened investor interest in quantum technologies.

The Valuation Landscape

In January, Honeywell successfully raised $300 million at a valuation of $5 billion for Quantinuum. Since then, IonQ has seen its valuation surge from $2 billion to an impressive $9 billion. Based on IonQ’s stock performance, Coe speculates that Quantinuum could reach a valuation of around $20 billion. This optimism is further fueled by the rapid advancements in quantum computing and the increasing number of applications in diverse fields.

Competition and Partnerships

Honeywell’s Quantinuum is widely regarded as the second-largest player in the quantum computing space, trailing only Alphabet Inc., the parent company of Google. This competitive advantage is bolstered by Quantinuum’s partnerships, notably its collaboration with Microsoft Corp. (MSFT), which enhances its capabilities in advancing quantum technologies.

Investment Landscape

Notably, Quantinuum’s investment backing features prominent names such as JPMorgan Chase & Co. (JPM), Amgen Inc. (AMGN), and Mitsui & Co.. These investors are betting on the company’s ability to leverage its quantum computing technology for practical applications, including breakthroughs in materials discovery, cybersecurity, and next-generation quantum artificial intelligence (AI).

Challenges Ahead

However, it is essential to acknowledge existing challenges. Currently, Quantinuum is operating at a loss of about $200 million annually, raising concerns about its short-term profitability. The path to financial stability and profitability remains a significant focus as investors await signs of effective monetization strategies from Honeywell’s management.

The Road Ahead

As Honeywell navigates potential structural changes, the fate of Quantinuum remains closely watched by analysts and investors alike. Coe has reiterated a peer perform rating for Honeywell, emphasizing that while a breakup could unlock value, the process will require time to optimize various business units effectively.

The Future of Quantum Computing

Looking ahead, the quantum computing sector is witnessing an explosion in interest, with companies like D-Wave Quantum Inc. (QBTS) and Rigetti Computing Inc. (RGTI) also making headlines for their remarkable stock performances, soaring by 797% and 815%, respectively, in 2024. These trends point to an increasingly competitive landscape where innovation and strategic partnerships will play pivotal roles in determining which companies emerge as leaders in the quantum realm.

Conclusion

As the quantum computing revolution unfolds, Honeywell’s Quantinuum stands at the forefront, with potential value estimations pushing towards $20 billion. The combination of strong partnerships, significant investment backing, and strategic considerations surrounding potential IPOs could leave a lasting mark on the financial landscape of quantum technology. Investors and market watchers alike will be monitoring this intriguing sector closely as it continues to develop and evolve.