Honeywell CEO Shuns ‘Ridiculous’ Deals in Focus on Software


Honeywell International Inc. Chief Executive Officer Darius Adamczyk is eager to buy companies to accelerate expansion of the industrial behemoth’s software business and has $15 billion of cash on hand to do it.

The main obstacle is price, which ranges from expensive to downright “ridiculous,” he said, as rivals and private equity firms capitalize on low interest rates to court software makers. While Adamczyk is confident the software business can grow internally, some analysts wonder if he’s missing out on opportunities.

“He wants to transform Honeywell into an industrial software company. So far, it’s a game plan but not a lot of runs on the board,” said Deane Dray, an analyst at RBC Capital Markets. “We haven’t seen a lot of M&A activity to support this.”

Honeywell’s aim is to use software and sensors to help industry squeeze savings out of physical assets and plant operations, especially in markets where it already sells controls for aerospace, the energy industry, buildings and warehouses.

As manufacturing rivals have snapped up software companies, valuations have climbed. Roper Technologies Inc. in August agreed to pay $5 billion for a company that provides insurance-industry software. Two weeks ago, Emerson Electric Co. agreed to acquire Open Systems International Inc. for $1.6 billion to digitalize the electric grid.

Adamczyk has deflected pressure to strike deals by accelerating internal growth of software.

Honeywell CEO Shuns ‘Ridiculous’ Deals in Focus on Software

“You have to have an organic strategy,” he said in an interview as Honeywell prepared to celebrate its centennial as a publicly trade company on Thursday. “Just purely having an inorganic strategy to grow your software business is extraordinarily expensive. A billion dollars spent doesn’t even go very far.”

A year after taking over as CEO in 2017, Adamczyk formed a separate software business that is growing at a 20% annual clip and now has $1.5 billion of sales. Revenue from all software, including code embedded in products, is $4 billion, or about 11% of total sales.

He hired Que Dallara, a veteran of Microsoft Corp. and TE Connectivity Ltd, to run the business and armed her with 3,500 employees, including a sales force of 350.

Germany’s SAP SE formed a partnership with Honeywell to offer real-estate customers the ability to link data from administrative systems and discover ways to improve efficiency. Honeywell plans to expand the alliance to other industries and will sign on more large cloud partners to its software business that covet Honeywell’s industrial know-how.

Although Adamczyk has hired a new M&A chief, Emily McNeal, to juice acquisitions, deal making has become tentative during his tenure. Honeywell has purchased seven companies since 2017. The largest deal was the $480 million acquisition of Transnorm, a maker of warehouse conveyors.

“I’m confident we’re going to be active, but we’re going to be also patient,” Adamczyk said. “Once you’ve spent the money, you can’t get it back.”

Quantum Computer

Honeywell’s digital push also includes the development of its own quantum computer. Though it’s in early stages of the technology, the device already has lined up customers for power that promises to surpass that of even the largest supercomputers. Adamczyk sees the business collecting $1 billion of annual revenue within 10 years and possibly faster.

Matching code and widgets comes naturally to Adamczyk, who has a master’s degree in computer engineering and got his first job out of college in 1988 as a designer of sonar and aerospace systems for General Electric Co. He went over to Honeywell in 2008 when it purchased Metrologic, a maker of bar-code scanners, where he was CEO.

“That software-hardware combination has always been a part of me,” he said. “I’ve had it in my blood a long time.”

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