“GT Advanced Technologies Inc. Chief Operating Officer Daniel Squiller said bankruptcy was necessary because an ‘ambitious’ supply agreement with Apple Inc. had become ‘unsustainable’ and terms couldn’t be reworked,” Dawn McCarty reports for Bloomberg. “Under the terms of the 2013 agreement, Merrimack, New Hampshire-based GT Advanced was required to supply millions of units of sapphire that Apple wasn’t obligated to buy, and had to maintain certain key employees, Squiller said.”
“A few weeks before the bankruptcy filing, he said, executives made a detailed presentation to Apple senior management in charge of the project advising them that GT Advanced was ‘losing substantial amounts’ and terms of the deal needed changing,” McCarty reports. “The company told Apple it was ‘projected to run out of cash in a few weeks.’ ‘While Apple responded with various proposals, after intense negotiations, none of Apple’s proposals solved the economic issues in an effective manner,’ according to Squiller.”
“The company was required to negotiate exclusively with Apple for 30 days if it wanted to sell substantially all assets or its sapphire business, or it would have to pay Apple $1 billion for violating the provision, according to court papers,” McCarty reports. “Still, Squiller endorsed a settlement between the companies announced last week in U.S. bankruptcy court. He said GT Advanced and Apple ‘could assert significant claims against each other’ that could be ‘risky, protracted and expensive.’ The agreement ‘provides GTAT with the ability to end its relationship with Apple in an orderly manner,’ he said.”
Read more in the full article here.
Related articles:
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
For a so called “orderly” end to the relationship, GT seem to be keen to badmouth Apple…
They over promised and under delivered and are unhappy Apple held them to their original deal. Maybe Apple could have been more flexible, but who knows, perhaps they could have been more forthright in their representations to Apple.
For Apple using Sapphire was always going to be a balance between its superior qualities against cost. I suspect it only just came down on the positive side and I’m sure at th time GT were oh so keen to over promise to get the deal. Like so many companies they were overly optimistic even with Apple footing much of the investment and likely thought that later they could effectively blackmail the customer into better terms thinking they had to much to lose to cancel. Their bluff was called and all hell broke lose it seems. Seems to me that they doth protest too much.
As Apple has stated, nearly half of a billion of their USDs are gone, but the manufacturing is still not functional to initially agreed criteria — even to this day. I can not imagine what more Apple could offer to them.
It was unsustainable… So that’s why some of their execs dumped their stock. Who ever bought that stock is getting screwed.
Looks like GTAT lost sight of their capabilities when they saw $$$$ raining on them. Seems to me that’s all they thought about.
The biggest problem with American businesses- American Businessmen (there are exceptions). Bad managers like to blame the hourly staff despite the fact that they hired them, wrote the job descriptions, evaluated them, designed the product or marketing and wrote policy.
Apple lost much of it’s greatness when a Harvard MBA from Pepsi was put in charge despite having no real vision and no stomach to make tough calls. He was followed by two more suits from American business again with no vision and no stomach to make tough calls.
From all appearances, GT Advanced was not up to the job. Sadly , too many American businesses are run this poorly or worse.
Not just American business Darwin. There are plenty of bad businessmen all over the world, just like there are bad people in every other profession worldwide.
Very true. Except in China, if you are really bad, you cease to exist. It keeps bad from showing up somewhere else.
Just saying.
You should read: “Poorly made in China” for great insight into the country.
We have an excess.
GT gave a good quarterly prognosis to its shareholders…me being one of them. The top two execs later dumped their holdings. Who could ever trust them again? They pooped upon their long investors. Law firms will only talk to you if you owned 3000 shares or greater. Didn’t expect sapphire to come out this year, but vested long thinking for sure it would come out next year…the watch announcement reaffirmed that. It dropped so much so fast.
“We don’t know how to run our business, but…. uh… but… it’s APPLE’S FAULT! Yehhhhh. That’s it.”