“The rapid meltdown of GT Advanced Technologies (GTAT) remains shrouded in mystery,” Dan Gallagher reports for The Wall Street Journal. “One thing is clear: it is a stark example of what can happen when expectations for a company get out of control and are based on potential gains from a single partner.”
“GT’s Monday filing for bankruptcy protection seemed to surprise everyone. Even analysts who were bearish on the maker of sapphire material due to concerns about cash flow figured the company would be able to raise more capital. But things deteriorated quickly, as the company seemed to burn though about $248 million in cash in a single quarter,” Gallagher reports. “That may have led to the company’s filing, since its cash, at $85 million, was below a $125 million trigger point that would allow Apple to demand repayment of about $440 million in loans it had advanced. Apple had agreed to lend GT a total of $578 million to help get a large sapphire factory in Arizona up and running. The tech giant reportedly withheld the last $139 million payment it was due to make, although it isn’t clear why.”
Gallagher reports, “What is obvious is that GT effectively bet the house on a new technology with a new business model and made itself dependent on a single customer—Apple.”
Read more in the full article here.
Related articles:
Apple’s withholding of $139 million payment led to GT Advanced bankruptcy filing – October 7, 2014
GT Advanced CEO sold 9,000 shares the day before Apple’s iPhone 6/Plus event – October 7, 2014
Law firms launch investigations into possible violations of federal securities laws by GT Advanced – October 7, 2014
Analyst: Apple may take possession of sapphire furnaces from GT Advanced – October 7, 2014
Apple to provide debtor in possession financing to GT Advanced? – October 7, 2014
Investors stunned over GT Advanced bankruptcy filing – October 7, 2014
GT Advanced files for chapter 11 bankruptcy court protection – October 6, 2014
Apple and GT Advanced rampup sapphire production in Mesa – August 11, 2014
GT Advanced expects sales of sapphire production tools to boost profit; shares surge – August 5, 2014
Apple and GT Advanced open second sapphire plant in Salem, Massachusetts – June 19, 2014
Apple patents method for embedding sapphire displays in LiquidMetal device chassis – May 27, 2014
Yes, this is still really weird. Paired with that thing about the stagnating iOS 8 adoption rate, it’s… wait, is it…? Yes! Apple is doomed! Doomed I tell you!
The real problem was not new technology, a new business model, or reliance on a single large partner. GTAT’s real problem was that it could not produce what it was selling.
Gorilla Glass was basically saved by Apple. Which goes to show that a single partner need not have anything to do with GTAT’s setback. Quite the contrary.
Even if Apple stopped using Gorilla Glass I doubt Corning would have filed for bankruptcy or the glass department dismantled. What take do you have on Apple ‘saving’ Gorilla Glass? It would actually be Apple hurting now.
“The tech giant reportedly withheld the last $139 million payment it was due to make”
That payment isn’t due until the end of October, so I’m not quite sure how they can say it is being withheld? Last time I checked, “withheld” was past tense.
I caught that, too. I think it might be that the payment has in fact been withheld, but GTAT still expects to meet production demands and get the payment reinstated by the end of October. Very unclear so far, though.
My spidey sense tells me that this is another of those stories where the way it’s currently being reported turns out to be misleading.
They promised porterhouse steaks and produced ground donkey meat. Not to mention the lack of baked potatoes.
gorilla glass is not a company. It’s owned by Corning. Corning was doing fine before they started selling the gg to apple
Not exactly. Corning were doing ok. But Gorilla Glass gave them an unexpected windfall that still continues to pay out. Thats the benefit of R&D and working on projects that have no immediate use.
Yes and it was in effective moth balls until Apple encouraged and backed them to bring the product to market originally for its own product line.