GT Advanced reaches bankruptcy deal with Apple, will sell off more than 2,000 sapphire furnaces to p
As part of its plan to "wind down" sapphire production operations after filing for Chapter 11 bankruptcy protection, GT Advanced Technologies will reportedly sell more than 2,000 sapphire furnaces to pay off an outstanding debt to Apple.
According Fortune's Philip Elmer-DeWitt, who was in court on Tuesday covering GT's bankruptcy proceedings, the firm has reached a deal with Apple to pay off its remaining debt by selling a total of 2,039 furnaces to third-party companies. The arrangement was described by GT's attorney as an "amicable parting of ways."
"Apple won't get the furnaces. It will take the cash from their sale as full settlement of the $439 million GT owes them," Elmer-DeWitt said in a post to Twitter.
Apple sunk $439 million into the GT deal, but since the sapphire maker was unable to deliver on agreed upon production goals, Apple withheld a final $139 million conditional payment and is now owed its upfront advances. GT subsequently filed for bankruptcy protection earlier this month, though the exact details surrounding the company's implosion are unknown.
In addition to the $439 million, Apple has agreed to let GT use the Mesa, Ariz., sapphire facility rent free for one year as the firm winds down operations. Last week, it was reported that GT is going to eliminate more than 700 jobs from Arizona plant operations by December.
Apple inked a $578 million contract with GT last November for production of raw sapphire material to be used in secret future products. At the time, Apple's use of the hard substance was limited to cover glass for the iPhone's rear-facing camera and Touch ID fingerprint sensor home button. The tech giant later announced plans for larger installations in certain Apple Watch models, which are slated to hit store shelves in early 2015.
According Fortune's Philip Elmer-DeWitt, who was in court on Tuesday covering GT's bankruptcy proceedings, the firm has reached a deal with Apple to pay off its remaining debt by selling a total of 2,039 furnaces to third-party companies. The arrangement was described by GT's attorney as an "amicable parting of ways."
"Apple won't get the furnaces. It will take the cash from their sale as full settlement of the $439 million GT owes them," Elmer-DeWitt said in a post to Twitter.
Apple sunk $439 million into the GT deal, but since the sapphire maker was unable to deliver on agreed upon production goals, Apple withheld a final $139 million conditional payment and is now owed its upfront advances. GT subsequently filed for bankruptcy protection earlier this month, though the exact details surrounding the company's implosion are unknown.
In addition to the $439 million, Apple has agreed to let GT use the Mesa, Ariz., sapphire facility rent free for one year as the firm winds down operations. Last week, it was reported that GT is going to eliminate more than 700 jobs from Arizona plant operations by December.
Apple inked a $578 million contract with GT last November for production of raw sapphire material to be used in secret future products. At the time, Apple's use of the hard substance was limited to cover glass for the iPhone's rear-facing camera and Touch ID fingerprint sensor home button. The tech giant later announced plans for larger installations in certain Apple Watch models, which are slated to hit store shelves in early 2015.
Comments
Wow.
It really looks like Apple will get the short end of the stick here. And it seems likely they're ready to cut their losses now and move on, potentially to a better partner.
I found video of what he did with Apple's money.
Can be said about every story ever reported.
It seems like there is more to this than being reported at present.
I agree... with the case being sealed (for now), we may never really know what went on. I thought that Apple essentially owned the furnaces and just "contracted" GT to run them.
GT is really coming across as the Solyndra of the industry.
Wow.
It really looks like Apple will get the short end of the stick here. And it seems likely they're ready to cut their losses now and move on, potentially to a better partner.
Hopefully in the US. Would suck to have to go overseas to get it done.
With a limited skill set.
Rest assured that this deal will not include disclosure of the actual use for which Apple intended to put all that sapphire. There's simply no need for that particular information to be revealed and Apple would rather the world assume it was for iPhone 6/6+ displays without confirmation than to provide that confirmation and suffer the many news reports about how Apple short-changed consumers by substituting an inferior display covering (because you know that's exactly how it would be spun).
I wonder how much finished sapphire Apple has stockpiled.
Sometimes you just have to turn down a deal... no matter how lucrative it appears. GTA just didn't have the wherewithal to walk away from a deal with Apple.
Kudos to GTAT for standing up to Apple and its "oppressive and burdensome" agreement!
I hope GTAT can focus their energies on their primary business, sapphire equipment supplier, and bring their stock back to $8+ (where it was before signing the money losing agreement with Apple).
They will probably have to do it without ever getting payment in advance. Who would trust them after this performance? Where will they get financing? Looks bleak from here.
I agree... with the case being sealed (for now), we may never really know what went on. I thought that Apple essentially owned the furnaces and just "contracted" GT to run them.
GT is really coming across as the Solyndra of the industry.
You mean Apple's Solyndra.
Sometimes you just have to turn down a deal... no matter how lucrative it appears. GTA just didn't have the wherewithal to walk away from a deal with Apple.
I think you might be too charitable. The timing of stock sales from senior execs at GTA are very suspicious. This could be a situation where Apple got scammed. If so, that's pretty embarrassing for Apple. As a stockholder, I'd almost prefer that the story was Apple being a big meanie, rather than Apple being scammed...
Just thinking out loud here. Is it possible that Apple realized that sapphire was not going to work (any time soon, at least) for larger screens like phones? If that were the case, Apple could be relatively pleased that they have an out here. A little trash talk and some free rent is worth a lot less than the cash they will be getting back. And we have no idea how much product they stockpiled in the process--they might have all they need for a while...
Wow.
It really looks like Apple will get the short end of the stick here. And it seems likely they're ready to cut their losses now and move on, potentially to a better partner.
It also seems like Apple keeps turning the other cheek. They keep getting trash talked by this CEO and in return, they let him use the locale rent free...
Apple is not turning the other cheek. They forced a supplier into bankruptcy. Apple is in total control here. They own the factory in Arizona. Who do you think is going to be buying 2,000 furnaces at $.10 on the dollar? My guess is those 2,000 furnaces aren't going anywhere. The entity that buys them will be producing sapphire for Apple under even more favorable terms for Apple.
All I can say is Apple is awesome. They get to set whatever terms they want in their agreements and if they decide to **** a supplier, the media feels sorry for Apple. That is an enviable position. And no, I'm not being sarcastic. I really admire Apple's business acumen. And make no mistake, I'm not suggesting Apple did anything wrong. I'm sure Apple had a good reason to do what it did.