Let's stop here. Doesn't the bankruptcy mean Tim Cook can now say kiss good bye to his $500M?
No. We have no idea what the final outcome will be. The company could come out of this just fine and no one loses a dime, or Apple could be the first or last in line to get repaid. All you can say is that Apple's in a worse position today than they were 2 days ago. Well you can also say that kissing half a billion dollars away is hardly even material to Apple's finances. The more interesting question is whether this impacts the supply chain for the Apple Watch.
I'd imagine smaller suppliers will indeed start looking far more carefully at a contract with Apple in the future. Especially, if they already have a decent customer list.
Not sure that would matter. If they're important enough, and if alternatives are not available, Apple would try to buy them out. There is a price at which pretty much most people in business would sell (assuming that Apple was getting Value ? that Price).
Highly doubt it, supplier will whore themselves out to a company like Apple, also my experiences very few supplier even the big ones have good legal support when doing deals. Even when they do the top guys tend to override what the lawyers say due the first item I pointed out.
That's interesting. What I will say is that before this, anytime a public company (especially a smaller one) announced a deal to supply Apple (or even if it was rumored), their stock price would rise. After this, if you are a small to mid-size public supplier, and it was rumored that Apple was a customer, I wouldn't be surprised if stock prices start dropping. That may give the supplier CEOs some leverage.
I don't know much about this, so obviously not making any predictions, but I do agree with you that the effect of this will range from no effect, to not so good for Apple. There aren't too many positives for them here.
Not sure that would matter. If they're important enough, and if alternatives are not available, Apple would try to buy them out. There is a price at which pretty much most people in business would sell (assuming that Apple was getting Value ? that Price).
At that point wouldn't it be better for Apple to simply pay the higher price, or strike a deal which shares the risk better, than to make a purchase it wouldn't have otherwise (Apple buys only stuff it thinks gives it a competitive advantage, AFAICT).
I don't think this will disrupt Apple's supply chain at all, but it may lead to suppliers demanding better prices, or at the very least, more equitable risk sharing.
AT the launch, Apple did not say the glass display is Gorilla Glass, also the iPhone 6 webpage does not say if it is or isn't, but we all know that it is Gorilla Glass ....... same argument can be said for the Apple Watch and non-crystalline metals, but we don't all know about that
Apple rarely talks about the brands of components used in their products. Intel, nvidia, and AMD being the notable exceptions.
$160,000 worth of stock? As a CEO? Sorry, that's not that much money.
Agreed. He sold $ 10 million in stock this year. Besides, the sale was part of a planned sale scheduled in March. He should be fine. That's why they have planned stock sales so that nobody has to wonder if the current events triggered the sale.
Why would anyone sign to those terms and conditions. Those are ridiculous. The GTAT CEO basically sold his company to Apple for pennies on the dollar (if they owe Apple money, as is indicated, they will probably try to repay in the form of assets, such as a certain foundry to create Sapphire glass. And they will do it for pennies on the dollar because Apple is pretty much the entire market for that foundry, so it is worthless to anyone else).
It's obvious when you consider the context in which they signed onto the deal. GTAT's solar business, running at near a billion dollars a year in 2011 and 2012, totally collapsed in 2013 after the discontinuation of subsidies by the U.S. and a few other countries. The sapphire deal was GTAT's Hail Mary attempt to reboot the company. Without it, GTAT would have filed about a year ago. So no surprise they would have signed onto any demands and stipulations Apple put in front of them.
yeah agreed; especially in light of $10MM in stock sales during 2013. $160k could be akin to his annual interest.
I agree. The guy is selling stock as it's going up, and continues to go up. But he sells a measly amount one day before an announcement, and he's being investigated. It's nuts! He knew for months that apple wouldn't use sapphire, so why not investigate all of his sales this year instead? And why now, just because a publication sees this one tiny sale?
Behind that smiling antebellum Auburn facade is a stone cold killer.
If that story is true, Tim Cook is one B****d of a negotiator.
- We loan you ~$500M for 2 years
- Then you give us back the money in the form of discounts over 5 years on product you sell us out of our factory we built for you.
- All product from said factory is the property of Apple, even if we choose not to buy it (you can't sell it to anyone else)
- Oh, if you don't hit promised delivery requirements, we can demand immediate repayment of the loan.
Basically, if you don't perform on our schedule, we'll call our loans, and leave you twisting in the wind with a pile of sapphire boules tied to your ankles, you can only sell to us, if and when we want them.
(My guess is that TSMC blew one too many quality/deadline requirements... Tim now says he gets the money he loaned you and the farm AND your first born if you miss a deadline)
Then the CEO starts selling shares on the eve of the iPhone 6 release, which will show to the world the glass is not sapphire. Maybe not a huge amount, but given the 90% drop, well, the SEC and DOJ may threaten some Club Fed Time...
If anything, all those DRAM vendors thinking they'll make Billions selling to Apple, are now rethinking how easy money it will be.
Steve was vengeful, But Tim, he gets it in writing up front.
Pure speculation. Esp the bit about the deal between Cook and the company
Behind that smiling antebellum Auburn facade is a stone cold killer.
If that story is true, Tim Cook is one B****d of a negotiator.
- We loan you ~$500M for 2 years
- Then you give us back the money in the form of discounts over 5 years on product you sell us out of our factory we built for you.
- All product from said factory is the property of Apple, even if we choose not to buy it (you can't sell it to anyone else)
- Oh, if you don't hit promised delivery requirements, we can demand immediate repayment of the loan.
Basically, if you don't perform on our schedule, we'll call our loans, and leave you twisting in the wind with a pile of sapphire boules tied to your ankles, you can only sell to us, if and when we want them.
(My guess is that TSMC blew one too many quality/deadline requirements... Tim now says he gets the money he loaned you and the farm AND your first born if you miss a deadline)
Then the CEO starts selling shares on the eve of the iPhone 6 release, which will show to the world the glass is not sapphire. Maybe not a huge amount, but given the 90% drop, well, the SEC and DOJ may threaten some Club Fed Time...
If anything, all those DRAM vendors thinking they'll make Billions selling to Apple, are now rethinking how easy money it will be.
Steve was vengeful, But Tim, he gets it in writing up front.
There is surely nothing new, or different about the contracts Apple writes up. Every major contract has performance penalties written in. Some have performance bonuses as well.
If a company can't meet volume or spec marks, then there is a problem, and the customer doesn't expect to get hurt from it.
Why would anyone sign to those terms and conditions. Those are ridiculous. The GTAT CEO basically sold his company to Apple for pennies on the dollar (if they owe Apple money, as is indicated, they will probably try to repay in the form of assets, such as a certain foundry to create Sapphire glass. And they will do it for pennies on the dollar because Apple is pretty much the entire market for that foundry, so it is worthless to anyone else).
This is the way business works. We dint know what the contract said, so we can't really talk intelligently about the consequences. And people have to stop blaming apple for anything here. Every company does what is best for themselves. It may not work out, as it apparently hasn't here.
But GTAT was a small company. If this worked out, they would have become a big company. That's often a major lure to take risks. As we do t know exactly what the breath of products Gt was supposed to be making for Apple, we can't say how, or what they missed.
But they did say that production difficulties, lower than expected yields, etc were responsible for unexpected costs, and lesser income than predicted. For a company on the edge, that would do it.
Perhaps they were overconfident in their prowess. I can see them telling Apple, sure, we can do that. And biting their knuckles and thinking; "oh crap, what have we gotten ourselves in to?"
I think Apple may have pushed their luck with GTAT a little too far.
I'd imagine smaller suppliers will indeed start looking far more carefully at a contract with Apple in the future. Especially, if they already have a decent customer list.
With Apple's size, they are really struggling to find the suppliers they need, so I wouldn't be surprised if the power dynamics in the Apple-suppliers relationship starts tilting slightly more towards the suppliers.
I doubt if anything will change. Apple forwarded them the money for this. If everything had worked out as was expected, they wouldn't be in trouble.
But people have to stop assuming that Apple was planning on using this for their phones. We don't know that. The situation is likely much simpler, that as they announced, their expectations weren't met as to quality or production.
Let's stop here. Doesn't the bankruptcy mean Tim Cook can now say kiss good bye to his $500M?
No. Apple can emerge as a new investor. If they become a new primary investor, they get first dibs on everything, and their investments are preserved. They could then sell off the parts of GT they don't need. Afterwards, they could do whatever they wanted to with the plant, equipment, patents, etc.
Comments
Let's stop here. Doesn't the bankruptcy mean Tim Cook can now say kiss good bye to his $500M?
No. We have no idea what the final outcome will be. The company could come out of this just fine and no one loses a dime, or Apple could be the first or last in line to get repaid. All you can say is that Apple's in a worse position today than they were 2 days ago. Well you can also say that kissing half a billion dollars away is hardly even material to Apple's finances. The more interesting question is whether this impacts the supply chain for the Apple Watch.
Let's stop here. Doesn't the bankruptcy mean Tim Cook can now say kiss good bye to his $500M?
Nope.
Let's stop here. Doesn't the bankruptcy mean Tim Cook can now say kiss good bye to his $500M?
Not necessarily. Apple has to sign off on any final bankruptcy resolution.
GTAT "faces scrutiny..." "...now under even more scrutiny"
It would be helpful to know by whom?
Probably SEC.
I'd imagine smaller suppliers will indeed start looking far more carefully at a contract with Apple in the future. Especially, if they already have a decent customer list.
Not sure that would matter. If they're important enough, and if alternatives are not available, Apple would try to buy them out. There is a price at which pretty much most people in business would sell (assuming that Apple was getting Value ? that Price).
Highly doubt it, supplier will whore themselves out to a company like Apple, also my experiences very few supplier even the big ones have good legal support when doing deals. Even when they do the top guys tend to override what the lawyers say due the first item I pointed out.
That's interesting. What I will say is that before this, anytime a public company (especially a smaller one) announced a deal to supply Apple (or even if it was rumored), their stock price would rise. After this, if you are a small to mid-size public supplier, and it was rumored that Apple was a customer, I wouldn't be surprised if stock prices start dropping. That may give the supplier CEOs some leverage.
I don't know much about this, so obviously not making any predictions, but I do agree with you that the effect of this will range from no effect, to not so good for Apple. There aren't too many positives for them here.
Not sure that would matter. If they're important enough, and if alternatives are not available, Apple would try to buy them out. There is a price at which pretty much most people in business would sell (assuming that Apple was getting Value ? that Price).
At that point wouldn't it be better for Apple to simply pay the higher price, or strike a deal which shares the risk better, than to make a purchase it wouldn't have otherwise (Apple buys only stuff it thinks gives it a competitive advantage, AFAICT).
I don't think this will disrupt Apple's supply chain at all, but it may lead to suppliers demanding better prices, or at the very least, more equitable risk sharing.
Apple rarely talks about the brands of components used in their products. Intel, nvidia, and AMD being the notable exceptions.
$160,000 worth of stock? As a CEO? Sorry, that's not that much money.
Agreed. He sold $ 10 million in stock this year. Besides, the sale was part of a planned sale scheduled in March. He should be fine. That's why they have planned stock sales so that nobody has to wonder if the current events triggered the sale.
The 10 million was from this year not 2013, according the article.
So to sum it up, they strike deal with apple at end of Oct 2013.
Then 4.5 months later he files to sell shares in May, June and July to collect the $10 million.
Then one day before the iPhone 6 release does another $160k worth without filing like before.
This guy new they were f'd when he filed in March, September sale is just a smokescreen.
It's obvious when you consider the context in which they signed onto the deal. GTAT's solar business, running at near a billion dollars a year in 2011 and 2012, totally collapsed in 2013 after the discontinuation of subsidies by the U.S. and a few other countries. The sapphire deal was GTAT's Hail Mary attempt to reboot the company. Without it, GTAT would have filed about a year ago. So no surprise they would have signed onto any demands and stipulations Apple put in front of them.
This guy new they were f'd when he filed in March, September sale is just a smokescreen.
This may or may not be actually true, but at the moment it is utterly lazy, useless, blatant speculation on your part.
Not to mention the record sales of iPhones with sapphire lenses and buttons.
Apple must not be happy with them for whatever reason.
I agree. The guy is selling stock as it's going up, and continues to go up. But he sells a measly amount one day before an announcement, and he's being investigated. It's nuts! He knew for months that apple wouldn't use sapphire, so why not investigate all of his sales this year instead? And why now, just because a publication sees this one tiny sale?
Behind that smiling antebellum Auburn facade is a stone cold killer.
If that story is true, Tim Cook is one B****d of a negotiator.
- We loan you ~$500M for 2 years
- Then you give us back the money in the form of discounts over 5 years on product you sell us out of our factory we built for you.
- All product from said factory is the property of Apple, even if we choose not to buy it (you can't sell it to anyone else)
- Oh, if you don't hit promised delivery requirements, we can demand immediate repayment of the loan.
Basically, if you don't perform on our schedule, we'll call our loans, and leave you twisting in the wind with a pile of sapphire boules tied to your ankles, you can only sell to us, if and when we want them.
(My guess is that TSMC blew one too many quality/deadline requirements... Tim now says he gets the money he loaned you and the farm AND your first born if you miss a deadline)
Then the CEO starts selling shares on the eve of the iPhone 6 release, which will show to the world the glass is not sapphire. Maybe not a huge amount, but given the 90% drop, well, the SEC and DOJ may threaten some Club Fed Time...
If anything, all those DRAM vendors thinking they'll make Billions selling to Apple, are now rethinking how easy money it will be.
Steve was vengeful, But Tim, he gets it in writing up front.
Pure speculation. Esp the bit about the deal between Cook and the company
There is surely nothing new, or different about the contracts Apple writes up. Every major contract has performance penalties written in. Some have performance bonuses as well.
If a company can't meet volume or spec marks, then there is a problem, and the customer doesn't expect to get hurt from it.
This is the way business works. We dint know what the contract said, so we can't really talk intelligently about the consequences. And people have to stop blaming apple for anything here. Every company does what is best for themselves. It may not work out, as it apparently hasn't here.
But GTAT was a small company. If this worked out, they would have become a big company. That's often a major lure to take risks. As we do t know exactly what the breath of products Gt was supposed to be making for Apple, we can't say how, or what they missed.
But they did say that production difficulties, lower than expected yields, etc were responsible for unexpected costs, and lesser income than predicted. For a company on the edge, that would do it.
Perhaps they were overconfident in their prowess. I can see them telling Apple, sure, we can do that. And biting their knuckles and thinking; "oh crap, what have we gotten ourselves in to?"
I doubt if anything will change. Apple forwarded them the money for this. If everything had worked out as was expected, they wouldn't be in trouble.
But people have to stop assuming that Apple was planning on using this for their phones. We don't know that. The situation is likely much simpler, that as they announced, their expectations weren't met as to quality or production.
No. Apple can emerge as a new investor. If they become a new primary investor, they get first dibs on everything, and their investments are preserved. They could then sell off the parts of GT they don't need. Afterwards, they could do whatever they wanted to with the plant, equipment, patents, etc.
Looks like the "S" in the 2015 iPhone "6S" will stand for "Sapphire."
If GT Advanced can hold out that long.
Maybe Apple Watch sapphire crystals will keep them on life support.