Apple and GT Advanced: What went wrong

“A story that Apple tried for three weeks to suppress is now part of the public record,” Philip Elmer-DeWitt reports for Fortune. “When Apple’s chief supplier of sapphire filed for bankruptcy three weeks ago, included in the court documents was a sealed affidavit offered by Daniel Squiller, the COO of GT Advanced Technologies. It was sealed, according to GT’s lawyers, because it contained details covered by an Apple non-disclosure agreement that was going to cost GT $50 million for each violation.”

“On Tuesday, after three weeks of legal wrangling, Squiller filed a revised declaration that is probably as close as we’re going to get to a definitive account of where the deal went south,” P.E.D. reports. “His summary: ‘The key to making the transaction profitable for both sides was the production of a sufficient number of 262kg boules of sapphire crystal meeting the specifications required by Apple. GTAT has sold over 500 sapphire furnaces to Asian customers that produce 115kg boules. Most sapphire manufacturers using non-GTAT furnaces produce boules of less than 100kg in size. Production of sapphire at 262kg would provide for scale, that if accomplished, would be profitable to both Apple and GTAT. Unfortunately, the production of 262kg boules of sapphire could not be accomplished within the time frames the parties had agreed, and was more expensive than anticipated. These problems and difficulties resulted in a liquidity crisis at GTAT, which led to the commencement of these chapter 11 cases.'”

P.E.D. reports, “The juicy stuff, however, is in the details.”

Tons more in the full article here.

[Thanks to MacDailyNews Reader “BD” for the heads up.]

Related articles:
Beleaguered GT Advanced describes ‘unsustainable’ Apple relationship – October 29, 2014
Beleaguered GT Advanced says it can’t afford to fight mighty Apple, must settle – October 28, 2014
Apple ponders future sapphire options, leaves door open for GT Advanced – October 23, 2014
Apple considering other options for Arizona sapphire facility, helping former GT Advanced employees find new jobs – October 23, 2014
GT Advanced announces settlement with Apple; to exit sapphire production – October 23, 2014
Apple and GT Advanced settlement: Ending the madness – October 22, 2014
GT Advanced, Apple ink deal for ‘amicable’ split-up – October 21, 2014
GT Advanced Technologies Inc. suspended by Nasdaq – October 17, 2014
GT Advanced confidentiality hearing with Apple delayed – October 16, 2014
GT Advanced bankruptcy judge challenges Apple’s penchant for secrecy – October 15, 2014
Apple, GT Advanced in secret session with bankruptcy judge – October 9, 2014
Apple supplier GT Advanced: Confidentiality pact rules out bankruptcy explanation – October 9, 2014
Apple ‘surprised’ by GT Advanced’s bankruptcy filing – October 8, 2014
Shattered sapphire dreams at GT Advanced – October 8, 2014
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

9 Comments

  1. Bottom lime GT Advanced couldn’t deliver on terms they evaluated a d agreed to before signing a contract.

    Life ain’t a dress rehearsal you fucking cry babies it’s real and you don’t get to redo an agreement.

    1. Exactly as I theorised on another thread and GT probably knew it was a borderline promise they made and like do many companies will promise anything to get the business in the hope that should they not be able to complete on that promise that both parties are in it so deep terms and/or extensions can be negotiated. The cost of sapphire is such that in this case the economics precluded that. No point throwing bad money after good. They always say it’s better to be in debt to the bank by hundreds of thousands over thousands when things go bad didn’t work this time with Bank of Apple.

      1. But the scenario GT signed onto with Apple, was one they did with their eyes open & they knew it had a risk.

        What they knew, even if they would not speak it (highly likely), was that they had just “Bet the Farm.”

        Signing such a deal was like taking a loan from the Gambino family.

  2. I’m willing to give GTAT the benefit of the doubt on a lot of that stuff. As someone who has to estimate and bid on work with a new client, it is impossible to know how much time said client will add to the cost of the job simply by micromanaging the job. And I doubt GTAT had any experience the perfectionism they probably ran into with Apple. I’m not excusing them. GTAT rolled the dice and they came up snake eyes. They wanted the win so bad that they didn’t demand adjustments from Apple as the train was slowly running off the rails. It’s a shame it didn’t work out successfully for both companies. What is most egregious, however, are the stock sales by insiders. They left a lot of investors holding the bag when they knew they were headed for a fall.

    1. “And I doubt GTAT had any experience the perfectionism they probably ran into with Apple.”

      I’d suggest if they didn’t that is abysmally bad management. Ten minutes research on the Web or a few phone calls would tell them what Apple would be like.

    2. Exactly.

      There is no way all this happened in a one or two week period. Management and operators knew long ago they were in trouble but publicly lied to investors and painted a bright picture. All the while they were cashing out stock.

      As I said before, get the class action sues going and without question a whole lot of GTAT brass need to go to jail.

      It’s fraud.

  3. As others have said, all relevant information regarding Apple and its business predilections was available to GT prior to entering the contract. The problems that occurred after the contract was signed seemed to be those the parties could have reasonably anticipated, and GT could have insisted on protections for itself. Most likely, it did request such protections, Apple balked, and GT did the deal anyway. The law will protect a party in cases of fraud, duress, etc., but it will not, as appears to be the case here, save a party from a bad deal.

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