Ondrej Holzman Apple on Wednesday commented for the first time on the surprise news of the bankruptcy of GT Advanced Technologies, a manufacturer of sapphire glass. The financial problems and the request for protection from creditors did not only surprise investors and technology observers, but also Apple itself, a close ally of the company.
GT Advanced a year ago signed a long-term contract with Apple, to whom it was supposed to supply sapphire glass for upcoming products. Almost $600 million, which Apple gradually paid out, was supposed to be used to improve the factory in Arizona, from where the Californian company was then to take glass for iPhones (at least for Touch ID and camera lenses) and then also for the Apple Watch.
The last installment in the amount of 139 million dollars, which was supposed to arrive at the end of October, but Apple he stopped, as GT failed to meet the agreed schedule. Nevertheless, Apple tried to keep its partner. In the contract, it was agreed that if the amount of GT's cash fell below $125 million, Apple could demand repayments.
However, the Californian company did not do so and, on the contrary, tried to help GT meet the limits set by the contract and thus qualify for the final 139 million installment. Although Apple tried to keep its partner solvent, GT filed for creditor protection on Monday.
So far, however, the sapphire manufacturer has not given any further explanation for his surprising move, so the whole matter is mainly a subject of speculation. Apple is now working with Arizona representatives on next steps.
"Following GT's surprising decision, we are focused on keeping jobs in Arizona and will continue to work with state and local officials as we consider next steps," said Apple spokesman Chris Gaither.
We should learn the first details on Thursday, when the first hearing is scheduled for the use of Chapter 11 bankruptcy protection from creditors. GT should explain what led it to declare bankruptcy on Monday, which has reduced the company's market value to almost zero. However, even though GT is in huge financial trouble, the price of one share has risen slightly in recent hours.
did the problems and the request not surprise you? Those must have been LIFE-sized problems ;)
I wonder how many people will understand this ;-)
So hopefully Apple will buy it and I'll be taken care of :-)
Well, there is nothing easier than pushing the manufacturer of anything into a corner with unrealistic contracts and then buying the company literally for a pittance with the smile of a good uncle. Maybe Apple wanted to buy it earlier, but the owners didn't like the terms and the price. They preferred to go into cooperation with the fact that as a supplier of Apple, their stock will rise. Well, instead they slowly fell to zero. Well, who is going to buy it now... a good uncle who, if someone else wants to buy it, then according to the contract, the other interested party will have to return 600 million dollars to Apple... simple calculations. But that's business too.
Hello,
thanks for your article.
Please allow me a small comment, a bit from a different (stock market) point of view...
Another interesting thing about GT's story is that for a long time this stock was popular with shorters (decline speculators). Recently, even every other share from the free float was SHORT. Of course, this lured buyers (bullish speculators) to short squeeze = a situation where the stock goes up, because bearish speculators have to buy it to minimize their losses.
We all know how it turned out now :-), but the fact remains that the production of sapphire is simply expensive and Apple was not able to pay so much for it even though it is supposed to be several times harder than Gorilla Glass (Corning).
It is also interesting that during the presentation, when Apple presented the new iPhones, it was clear that the sapphire will only be on watches and that will be delivered in 2015. GT shares lost approx. the management did not issue any other report on the revision of the economic outlook, adjustment of profit/requirements. It could be said that everything was "included" in the price of the event.
The situation surrounding this is not entirely clear, but the latest reports are that APPL has already started Chapter 11 to return part of the money, which GT obviously does not have.
With the passage of time, it gave me the impression that the GT simply does not have those characteristics and that the "shorters" were playing... GT will then be produced only for "solars". If this is not the case and sapphire is really that hard, then APPL will not invest in GT, but Corning.
At a minimum, we can expect mass complaints against the board of directors, because "black Peter" is holding it. Either they lied about the true properties of the sapphire or they signed bad contracts..
have a nice day
Ales Vavra
Thanks for the comment. I don't have as much economic and stock market insight as you, but I wouldn't worry about sapphire as such. What I then read about the GT case was that it was a clear bet on one card (in this case, almost exclusive cooperation with Apple) and then blew up due to the fact that they could not deliver the contracted volume of sapphire, or did not meet Apple's quality limits. I absolutely do not want to believe that Apple wrote off sapphire for iPhone displays at the last minute, because what we know about sapphire is not suitable for such purposes. Gorilla Glass is at least a better choice for displays. It's hard to say what GT didn't fulfill, but the contracts with Apple, from which Apple clearly profited and GT was disadvantaged, don't seem too good to me. But of course I don't see the details.
Ondrej, I understand that you have a small delay in publishing articles compared to English customers, but you can use it and think a little about what you write, right?
Everyone knows about GT as a supplier of sapphire glass, but have you at least looked at what their business and income has been up to now? Sapphire was definitely not…
Richard, I know GTAT's only business isn't just sapphire, but I don't understand your comment. Do you think that the sapphire was not one of the main causes of the sudden decline?
looks like not... their annual reports are quite interesting in terms of computing, it's amazing how few of the analysts who inflated their shares have looked at their sales composition so far
but what will definitely not be kosher (even if GTAT claims it is) will be the sale of shares during September... you need to prepare popcorn and watch the show, Apple definitely does not want to own a factory, patents and exclusivity are enough for them, but maybe Cook will get mad and 'buy them all' :)
http://investor.gtat.com/annuals.cfm
http://www.forbes.com/sites/chuckjones/2014/10/08/is-apple-responsible-for-gtats-bankruptcy/