Text size

Honeywell International and Cambridge Quantum Computing are merging their fledgling quantum-computing businesses into a stand-alone company, signaling that quantum computing is just about ready for prime time.

The deal, essentially, combines Honeywells (ticker: HON) quantum hardware expertise with privately held Cambridges software and algorithms. It is as if the two had formed the Apple (AAPL) of the quantum computing world, in that Apple makes hardware, operating systems, and software applications.

This is an inflection point company that will drive the future of quantum computing, said Tony Uttley, currently the president of Honeywells quantum business. He will be president of the new company.

Honeywell says quantum computing can be a trillion-dollar-a-year industry some day, just like smartphones, although for now, the smartphone market is some 2,000 times bigger. Moving now, at the point before the gap begins to close, could be a win.

We are at a [industry] phase where people are looking to hear more about practical quantum use cases and investors want to know if this is investible, said Daniel Newman, founder of Futurum, a research and advisory firm focused on digital innovation and market-disrupting technologies.

This deal will speed the process of investor education. The new business is targeting $1 billion in annual revenue in the next two to four years. Wed be disappointed if we were only at a billion in a few years, said Ilyas Khan, Cambridges CEO and founder. He will be CEO of the new company, which he said will decide whether to pursue an initial public offering by the end of the year.

A name for the business has yet to be chosen.

The new company plans to have commercial products as soon as late 2021. The initial offerings will be in web security, with products such as unhackable passwords. Down the road, there are commercial applications in chemicals and drug development.

In terms of sheer brainpower the new enterprise is impressive. It will have about 350 employees, including 200 scientists, 120 of them with doctorate degrees.

The company will start off with a cash injection of about $300 million from Honeywell. The industrial giant will own about 54% of the new company for contributing its cash and technology.

Honeywell stock isnt reacting to the news. Quantum computing is still too small to move the needle for a $160 billion conglomerate. Shares were down slightly in early Tuesday trading, similar to moves in the S&P 500 and Dow Jones Industrial Average.

Year to date, Honeywell stock has gained 7%.

Write to Al Root at allen.root@dowjones.com

Go here to read the rest:

Honeywell Takes Quantum Leap. The Apple of Quantum Computing Is Here. - Barron's