WHEN: Today, Tuesday, November 10
WHERE: The CNBC Evolve Summit
Following is the unofficial transcript of a CNBC interview with Honeywell CEO Darius Adamczyk live from the CNBC Evolve Summit on Tuesday, November 10th.
Mandatory credit: CNBC Evolve Summit.
JIM CRAMER: I want to get right to it. First of all, Darius, thank you so much for being part of Evolve because I think that you guys are not just evolving, you may actually be causing revolutions. And I want to talk about what it means first, as Tyler said, to be in the Dow from 1925 to 2008, and then you leave it, and then you’re back in. What does it say about agility and evolution?
DARIUS ADAMCZYK: Good to see you again, Jim, and good to talk to you. As you can imagine, that was a tremendous honor for all of Honeywell. And what was really surprising to me is that I learned about rejoining the Dow at the same time everybody else did. I mean, I was literally looking at my phone, and I had one of these Wall Street Journal tags come across that basically said: Honeywell and Salesforce and Amgen rejoined the Dow. I said: Wow, that’s terrific! As you know, we got asked to leave the Dow in 2008, so it’s just incredibly inspiring to be back and be part of that small club. And I know I speak on behalf of all of Honeywell employees as to how proud and excited we are to be back. As you know, Jim, on top of that, in September, we also enjoyed our 100-year anniversary as a public company. So September was a month for us to celebrate Honeywell and celebrate a lot of great things that we bring to the world.
JIM CRAMER: Now, many companies — I’d say most companies never get to 100, and obviously there are only 30 companies in the Dow. What do you attribute are the main reasons why Honeywell is relevant today and was relevant 100 years ago?
DARIUS ADAMCZYK: Well, I think you have to continue to disrupt yourself. I mean, you can never stay comfortable. You can never feel like, okay, now we’ve figured it out and we can just kind of, you know, harvest what we’ve done. You always have to innovate. You always have to stay relevant. You have to think five to ten years ahead about what’s going to be important to the world in general, what technologies are going to be important. And you have to balance a bit between what you need to do to deliver the year, the quarter, and then what the next CEO is going to need to deliver their year 10 or 15 or 20 years from now. And I think that whether it’s Dave or myself, we always ran Honeywell that way and always tried to balance the short-term and long-term investor of the future, but still deliver for our investors in the short term. And it is possible to do that. As you know, I’ve probably emphasized even more the technology angle of Honeywell, you know, primarily through software, but not just through software, staying relevant. You know, really this pandemic — and you know our portfolio, Jim, has dealt us a tough hand. But I think what we’ve done is we have very quickly transformed and said, Well, it’s actually an opportunity. It’s not a tough hand. It’s an opportunity for us to change. And whether it’s in mass production; whether it’s sensors for ventilators; whether it’s our healthy solutions for buildings, the aircraft and other things; whether it’s the new packaging material for a vaccine, which, you know, we got some terrific news yesterday. I don’t know about you, but I’ve been excited for the last 24 hours. We’re trying to stay relevant to what it’s going to need for the next decade.
JIM CRAMER: Sure! Let’s give some solid examples so people realize, because sometimes I feel like your company is more of a software as a service business. You have a huge number of engineers, people don’t realize it, and yet you have fallen into, in some ways, to be the only player in what I regard as being the company that connects the data. When I hear you say the future is high in your data, I think that’s something that — that makes you sound like you’re Andrew Jassy at Amazon Web Services or you’re Marc Benioff at Salesforce. But the fact is you’re a valimet of intervention, and in some ways you really are, to quote Barron’s, you really do want to be the Tesla of your industry. Is it possible that a company that is known as a hardware company can develop a software as a service business that can be lucrative four or five years from now?
DARIUS ADAMCZYK: Sure. And the answer is absolutely. Let me just give you a little background as to why. Because if there is one common thread through all the different businesses that we’re in today, whether it’s buildings or aerospace or the industrial segment or warehouse automation, there’s one fundamental thing that is common. We are predominantly a controls company. So whether it’s controlling how a building operates, controlling how an aircraft flies, controlling the warehouse, that is the common thread throughout. And obviously when you control things, you have to be connected to everything, and you have to collect the data that’s exhibited in all the devices, all the sensors throughout the systems that we happen to be a part of. And obviously we’re — and you incorporate hardware and software as part of your solution. So for us to make that leap and say, we’re going to use a lot of this data differently, not just to control things, but to actually bring other value sets, such as energy savings, such as safety, such as efficiency, proficiency, those are all opportunities that we have. And, you know, whether it’s our offerings in connected buildings, connected aircraft, connected warehouse, we’re just leveraging what we’ve been doing in a very different way. And it’s not such a big leap for us. I mean, I know we’re kind of viewed as this industrial company, and that’s what we are, and sure, those are our roots, but we’re also a controls company and a technology company that provides technology for the industrial segment. And that’s why I don’t think this leap is as great as people think.
JIM CRAMER: But I think people have to understand. And when I read something that your company puts out, Honeywell introduces quantum computing as a service with subscription offering, and when people tell me you’re an industrial, I think wait a second. That’s not the right thing to look at. This is a connected company with software that it sells as a subscription, as if it were Salesforce or Workday, as if it were service now.
DARIUS ADAMCZYK: Sure, absolutely. And as you know, that’s not the only place where we do that. We obviously do it in our quantum computing business. And we’re gaining customers literally by the day. I mean, you know, I promised our investors that in 2020 this will become real and we’ll start generating revenue and we are, and it’s going to accelerate next year. But our whole entire Honeywell-connected enterprise business, which is run by one of our leaders Que Dallara, I mean, fundamentally her entire business is software as a service.That’s kind of how she generates revenue. And that’s growing as a part of that. So, you know, it’s a natural evolution of who we are and who we’re evolving to be. And, you know, we’re always going to be a bit of a hybrid that’s going to have some hardware presence, but the software is going to become a much more prominent part of who we are and how we move forward.
JIM CRAMER: A very good example of Dave Cote, your predecessor’s, book, which is talking about making money short term and long term, I think is your warehouse automation business, which I understand to be sold out. I understand that I can’t get Intelligrated right now because there’s so much demand.
DARIUS ADAMCZYK: Well, for you, Jim, we might make some exceptions. But, no. I mean, jokes aside, it is — the business is booming right now, and it’s not a surprise. I mean, obviously the COVID era really drove to home delivery, warehouse automation, and so on, and we’ve been expanding that business very, very quickly in the U.S., but also we’re growing internationally and we’re trying to move it even more towards the use of robotics, use of what we call a dark warehouse, which is minimizing labor in a warehouse, and we’re making great progress and winning a lot of jobs. So it’s been a great bookings year for Intelligrated, but I think it’s only the beginning. I don’t think that sort of home delivery, personal delivery — Sure, COVID accelerated that trend, but it’s something that’s going to continue, and our Intelligrated business is leading the charge to enable customers to make that leap.
JIM CRAMER: I’ve been following very closely what you have to say, including in your last conference call about aerospace, obviously a huge business, it’s the elephant in the room to some degree. You were talking about how you do not think air travel is going to return to pre-pandemic levels anytime soon. Can you adjust that view in light of the fact that Pfizer has a vaccine that so far shows 90 percent, 90 percent response?
DARIUS ADAMCZYK: Yeah. Well, I think in my personal opinion, I think the news relative to a medical solution has been slightly on the negative side rather than the positive side. I’m an optimist so I look at — I always try to look at the glass half full. Somewhat yesterday, I was vindicated, because I don’t think most people expected a vaccine and it would have an efficacy of 90-percent plus. And I think there’s more good news around the corner. So whether it’s Pfizer yesterday, hopefully we’ll get some good news from Moderna, AstraZeneca, J&J, these are all phase III trials. And I actually think that there’s a lot of pent-up demand to travel again. People want to get on an aircraft, whether it’s personal travel or business travel. You know, I want to get out there and travel again, and I think a lot of our colleagues at Honeywell do, a lot of my friends and family want to travel again. And I think as soon as they feel safe, they’re going to do it. Hopefully we’ll have a relatively quick rollout of the vaccine in the first half of 2021. And I see travel returning in force as soon as maybe even the second half of next year.
JIM CRAMER: Well, you’re doing a lot just in terms of safety. Safety of airplanes, safety of buildings, you’re making them safer and also more energy efficient. These are two themes that dovetail, frankly, with humanitarianism, dovetail with ESG. And it seems to come very naturally to you and to your company.
DARIUS ADAMCZYK: Thank you, Jim. It is important for us. You know, when this COVID crisis first hit, we focused on things that really mattered to the work, the crisis-oriented things. We jumped into the N-95 mask production. Frankly, we didn’t do it because of the economics. The economics weren’t great. We did it because our country and the world was in crisis, and I thought it was the right thing to do. But since then, we’ve even pivoted to providing and enabling the world to get back to the new normal. So whether it’s flying again, whether it’s having fun again, whether it’s returning to the workplace and providing these healthy solutions, which, you know, clean the air, which do that in a very efficient, effective way without the use of necessarily chemical agents and so on. We want the world to get back to working normally, having fun normally. I think we’re all looking for that day, and I’m very proud that Honeywell can offer a lot of the solutions to help us get there.
JIM CRAMER: I know people have to understand you and your company. For instance, I came to you trying to develop a mask that people will wear, not the one that you gave me that I absolutely wear everywhere — and I’m privileged to have that, and people think I’m pretty darn cool. It’s my sport mask. I wear it everywhere. And it stays clean, and it’s got a great liner. But you’re also helping out some 15- to 24-year-olds make a million dollars trying to develop a mask. And you jumped right at that, because your company seems to have a mission that’s xprize.org/mask. One of the people in your conference call, it was just incredible, she said: I’m looking at your business, and it looks like that you’re targeting 50 percent ESG. And the irony of it, is no, you’re not targeting anything! You’re targeting what is good, and it just happens to be 50 percent ESG, which is something I don’t find any other company doing.
DARIUS ADAMCZYK: No, it just comes natural to us. It’s been that way for a long time. We bring great things to the world, which happen to be ESG oriented and ESG friendly. So whether it’s energy savings, whether it’s keeping our medical professionals safe, whether it’s keeping the industrial workers safe, whether it’s protecting the industrial worker from dangerous gases, I mean, you know, I could go on and on about these solutions. Whether it’s having the most environmentally friendly refrigerant molecule in the world. We offer these solutions today. And by the way, thank you and Marc Benioff for inviting us to be a part of the mask contest. That was a great thrill and something we loved to participate in, so I have to give you and Marc a great deal of credit for that. We’re more than happy and willing to participate, and we’re glad we could play a small role in that.
JIM CRAMER: Well, you’re such pioneers. Just the other day you did something. I know my viewers at Mad Money think I’m obsessed, but I have decided that green hydrogen — this is my friends at Linde convinced me that green hydrogen is for real. And I like the plug power, guys. You did — I know it can be just for experimentation, but you did a little Ballard deal the other day, which indicates that you’re open-minded about hydrogen and drones. I mean, you guys are really thinking different from most companies.
DARIUS ADAMCZYK: Yeah, well, thank you for noticing. It was a relatively small acquisition but a very important one because, as you know, we put together a whole new business unit around UAS/UAMs, and we think another way to power them is through the use of hydrogen. It’s just another example of thinking ahead. I don’t think UAMs are going to be a meaningful part of our revenue portfolio in the next year or two, but I think they are going to be very meaningful in the next decade or two. And we think that hydrogen is a very interesting energy to power these type of vehicles. Having said that, we also put together a sustainability technologies business unit, which kind of has two or three primary areas of focus. One is fully recyclable plastics, we want to be part of that solution. The second, which is — think about eco finding, solutions that we already have. And then energy efficient and economically viable energy storage, which really is the last linchpin to make renewables a reality and much more prevalently used throughout the globe. So we put a whole business unit in place about a year ago, and those are the kinds of solutions we’re focused on again. So again, we’re kind of thinking ahead about, what does the new energy footprint look like and how does the new world of plastics look like? And some of the these solutions are available now, some of them three years from now, and maybe others five to ten years from now.
JIM CRAMER: On my show, I got so much when you were on, so many Twitter questions about why I screwed up. Why didn’t I ask more about your battery technology that can last longer than anyone? I said: Listen, it’s in development. I can’t speak for Darius. I can’t just say, listen, it’s nine hours or whatever. But you are working on revolutionary battery technology?
DARIUS ADAMCZYK: Absolutely, we are. We are. It’s interesting, our UOP business, which, you know, has kind of had its roots much more in oil and gas, and now it’s really evolving to the new energy footprint, they’re doing a lot of interesting research around — and it is still research. I mean, they’re building their prototypes now, literally this quarter. Hopefully they’ll work, and I’m confident that they will, but in case they won’t, we’re going to go off and do something different. But, you know, this is all about what Honeywell is all about. We’re going to try and evolve and lead the way in these new technologies. Some of them may work, some of them may not work. But if this one doesn’t work, then we’re going to develop another technology that’s going to be relevant for the future. And that’s sort of — The people who really understand Honeywell, that’s kind of what we’re all about. I think there’s a little bit too much focus when we talk about Honeywell, Well, you know their market is doing this or it’s doing that. Well, as an investor in Honeywell, the thing you should count on is the fact that whatever the markets are, whether they’re good, bad or indifferent, you know, we’re going to continue to innovate, we’re going to continue to stay relevant. You know, we are a solutions product company that’s always going to evolve and change and, you know, we hope to be one of those stocks that you kind of invest in and forget and you have a long future. And if you look at our track record in terms of the investor return, and whether you look over a year, three years, five years or a decade, pretty consistent returns. That’s kind of how we stay successful.
JIM CRAMER: It’s interesting you say this, because I was speaking with a very good analyst who follows you and likes you very much. There was a discussion this morning about how your stock — I was not part of this — might be expensive. And I looked at it. You’ve got 30 billion in buying power. If the economy is better, I think there’s maybe 250 a share that’s right there. Next thing you know, you’re selling actually below the market multiple. So those who say, wait a second, it’s expensive, what they don’t understand is if you come out of a recession and you have aerospace and you make some acquisitions, your stock is not classically expensive.
DARIUS ADAMCZYK: No, I think Jim, that’s spot on. I think our stock is inexpensive. Because the thing that we did is, we dealt with the reality of 2020. The reality of 2020 is that we had some very tough market conditions. So obviously, we reduced costs while trying to maximize savings – so we try to basically not only reduce our cost base, which we had to do, but also continue to innovate and bring you solutions. So now, as kind of the markets and the economies come back, not only are we going to be able to grow and grow very profitably, we also have a series of new solutions that we’re bringing to the market. Some of those being the healthy solutions that I talked about earlier, but also other innovations. So you’re spot on. Frankly, I don’t think our stock is expensive at all, and I think we’re going to go on a tremendous run here with a much-improved cost structure.
JIM CRAMER: Yeah, I completely agree. Over 200 today, 201, and going much higher. I was watching a documentary about polio and how we beat polio. In it, there were vials that they created, and they were glass and they kept breaking, but they had no choice. It was just glass, glass, glass. I hear about a billion vials here or a billion vials there and I think, there isn’t enough glass. Is there something else that can work?
DARIUS ADAMCZYK: Sure. And I can’t take any credit. We have some great people in our organization that came up with this idea, which is, as we started reading about the need for a vaccine, and we knew that very early on, and the literally billions of doses that are going to be needed for the next several years, because we still don’t know whether some of these vaccines will need to be reapplied annually or maybe they work permanently. But, either way, we’re going to need billions upon billions of vials of glass. Very instantly, it became very clear there’s going to be a shortage of glass vials. There just isn’t enough out there. And we already had a health care packaging business called Aclar, that we already used to package material. It really retains the moisture absorption, it’s made out of plastic but it’s durable, it’s lighter, it’s cheaper than glass. And very instantly, the team went to work, they called a lot of the pharma companies, and we’re in numerous trials at the minute — I mean, literally right now, to be an alternative to vials in some of the health care packaging, which again, I think, you know, we didn’t do this on purpose, but that’s a very ESG-friendly initiative because it’s going to help the world get these vaccines out that much faster than if we’re just purely dependent on glass. I’m very proud of the team that really came up with that idea. They executed it, and they literally moved from idea to execution in a matter of three months. And that’s just thrilling. I love to see that. I mean, the thing I’m really proud of about Honeywell is, yeah, we’re a big company, but I really think we move like a small, agile technology company. I’m very proud of that. I will give you one last data point on that. We have a lot of people that kind of come from the west coast and other places, because we’re trying to have a really diverse workforce and so on. And the biggest thing that they’re surprised about is the boundless – I can’t believe a big company can move this fast and make decisions this quickly. That’s music to my ears. That’s exactly what I want Honeywell to be, to act like a small, nimble entrepreneurial company.
JIM CRAMER: Well, I think that’s a great way to wrap it up, Darius, because we are evolving, and you want to evolve like a small, nimble company. The companies that don’t become dinosaurs and we know what happened to the dinosaurs in the end. Darius Adamczyk, CEO of Honeywell, thank you so much for everything you’re doing for your shareholders and for everything else you’re doing for the environment, because you’re doing more than almost any company I follow. Great to talk to you.
DARIUS ADAMCZYK: Thank you. Great to see you, Jim.
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