GT Seeks to Void 'Oppressive and Burdensome' Agreements With Apple, Outlines Sapphire Wind Down Process

[MagnusVonMagnum]

if it was so "burdensome & oppressive" to be a supplier for Apple, outside of going into an agreement with Apple in the first place, why would the CEO take almost $160K of stock value out of the company if its agreement with Apple created no value?

It created personal value for his own stock portfolio while screwing over all the stockholders that invested in his company. Furthermore, how is it oppressive to have a contract to make something even if it's not the best contract compare to shutting down the plant and filing bankruptcy? I smell a stinky fish here. Either it's not possible to make the screens Apple wanted EVER (at least as such they wouldn't shatter from dropping them a few inches even) or Apple was going to somehow screw them over royally in the long run if they didn't meet the deadline for the iPhone 6 which they obviously didn't make. It seems like a good time for Apple to just BUY the company while it's valued at squat if they have any interest in Sapphire what-so-ever. The silence at Apple is deafening, however. I'm starting to wonder if they ever had any plans to use Sapphire or if it was just a push to get other companies/competitors to invest in Sapphire out of a feeling of necessity that could ill afford to do so (i.e. other phone companies were suddenly looking back into it since Apple stood to corner the market on Sapphire screens, assuming they were so great which apparently they are not as-is today due to the tendency to shatter MUCH more easily than Gorilla Glass. Who cares about scratches, after all if your screen is in pieces?

 

[ThisIsNotMe]

Interesting. At $0.81 per share, thinking about buying 15,000 shares and see where the ride takes me.

 

[cocky jeremy]

Like so many people today - "Make the agreement to do xxx / don't do xxx / take no responsibility for your actions regarding xxx / declare bankruptcy and skate away!

No sense of taking the consequences for your actions.

The court should just give the company to Apple.

 

[3282868]

Lots of armchair lawyering here without any understanding of the law.

No judge is going to order a company to complete a contract at all costs to their ultimate destruction. It is stupid and uneconomic. That doesn't mean that GT is getting a get out of jail card either.

Then please, further enlighten us armchair lawyers and expound on your comment. Be certain to list law, case precedents and sources. (not being sarcastic, very serious and interested)

 

[theMaccer]

Interesting. At $0.81 per share, thinking about buying 15,000 shares and see where the ride takes me.

I just bought @ 0.78, could be my chance of retirement.

 

[phuxford]

[url=http://cdn.macrumors.com/im/macrumorsthreadlogodarkd.png]Image[/url]

Image​

Yesterday, lawyers for Apple's bankrupt sapphire production partner GT Advanced Technologies notified the court that court that the company would be seeking to "wind down" operations at its sapphire production facilities in Arizona and Massachusetts, while also pursuing efforts to escape from contracts related to those operations.

In a pair of filings today, GT has followed through on those plans, with one filing asking for court approval to void its contracts related to the operation, calling the terms of its contracts with Apple "oppressive and burdensome."GT believes it will be able to pursue further claims against Apple, but is unable to do so at this stage of the Chapter 11 bankruptcy proceedings, and so has asked that the agreements be voided while maintaining its right to pursue future claims against Apple related to the agreements.

GT's second filing addresses the wind down procedure for its sapphire production facilities, noting that sapphire boules currently being grown in furnaces are valued at roughly $20,000 each and take up to 30 days to grow, and thus it is in the interest of the company and its creditors to allow boules already being grown to be completed.The first stage of GT's Wind Down Process involves maintaining a crew of 75 employees to monitor ongoing sapphire growth and then remove the boules and prepare them for sale, a process expected to be completed by mid-November. The second stage, requiring 15 employees, involves the cleaning and decommissioning of the furnaces themselves to preserve their value. Finally, roughly 35 employees will be needed to "shut down and clean up" the Arizona facility, with final closure coming by December 31.

Overall, GT projects that 890 employees will lose their jobs with the shutdown, with the company seeking approval to spend approximately $65,000 in incentives to ensure certain qualified employees remain with the company during the wind down process.

Apple has not commented publicly on the matter beyond its initial statement expressing surprise at GT's bankruptcy filing and pledging to work to preserve jobs in the area.

(Image: GT sapphire furnace)

Article Link: GT Seeks to Void 'Oppressive and Burdensome' Agreements With Apple, Outlines Sapphire Wind Down Process

GTAT you are a worthless company, I can't believe Apple spent money on you.

 

[KPOM]

Could be or it could be that it was programmed stock selling which might be what the Apple execs selling shares are doing as well. It could be that the GT CEO is a complete crook and completely put one over on the biggest company in the world. It could be that he sold all of his stock as the very last official action just before filing bankruptcy too.

OR it could come out that Apple was flexing its very powerful muscles, deep war chest, tremendous legal power and so on to crush a relatively tiny company for some reason (Apple has had it's most senior exec say he wanted to go "thermo-nuclear" on another company.)

Regarding the programmed stock sales, it's entirely possible, but the WSJ reviewed SEC filings and saw that there was no obvious pattern to the sales (e.g. every month). That doesn't mean it wasn't programmed, but just makes it a little more difficult to show that it was.

In any case, I'm sure Apple was the dominant party in negotations, but there is no obvious reason why they would want a supplier to go out of business, either. Heck, they are still doing a significant amount of business with Samsung even as lawsuits continue over their IP disputes.

 

[HyperZboy]

I wonder what claims GT has against apple, they signed the contract and now they're looking to get something from apple?

It will be interesting to hear as time goes on.

The Bankruptcy Court has the ability to throw out confidential agreements for the sake of investors. Apple has little control of this, hence no statements from Apple. Interesting that GT is just plain happy to talk and brag about Apple costing over 800 US jobs! LOL

Apple is surprised that somebody dared to call their BLUFF! HAHA! Need more popcorn for this one.

 

[Labeno]

Convoluted Contracts

Funny how they were willing to sign those "Oppressive and Burdensome" agreements when they involved a bunch of money coming to them, but now that they're no longer "benefitting GTAT's estates", they want them voided...

Clint

Contracts can be amazing complex. Ever read the iTunes agreement you accept every time iTunes gets an update? Most people sign them base on the spirit of the contract which is generally what is talked about before signing. Once the contract is signed, every unethical trick may be used to benefit the contract writer (not sure if it was Apple in this case). For example, if a contract is based on a royalty payment, accounting tricks could be done to net it down to zero, and hence payment of something that is very popular might yield zero revenue to the creators. To remedy this you could hire a room full of lawyers to carefully dissect the exact meaning of a giant convoluted contract, and theorize to the unethical loop holes, but then you would lose all your revenue to the lawyers. It's a no win situation if you are dealing with unethical. This may not be the case with GT & Apple, but it's a common practice in the business world. Unfortunately in this reality, profit will almost always take precedence to ethics (sometimes there are exceptions).

 

[KPOM]

Either it's not possible to make the screens Apple wanted EVER (at least as such they wouldn't shatter from dropping them a few inches even) or Apple was going to somehow screw them over royally in the long run if they didn't meet the deadline for the iPhone 6 which they obviously didn't make. It seems like a good time for Apple to just BUY the company while it's valued at squat if they have any interest in Sapphire what-so-ever. The silence at Apple is deafening, however. I'm starting to wonder if they ever had any plans to use Sapphire or if it was just a push to get other companies/competitors to invest in Sapphire out of a feeling of necessity that could ill afford to do so (i.e. other phone companies were suddenly looking back into it since Apple stood to corner the market on Sapphire screens, assuming they were so great which apparently they are not as-is today due to the tendency to shatter MUCH more easily than Gorilla Glass. Who cares about scratches, after all if your screen is in pieces?

I doubt that Apple would have invested over $400 million at this point just to confuse competitors.

 

[CWallace]

From what I'm reading, I can't believe they signed this contract with Apple. They must have had stars in their eyes, but yet they have all this spelled out in the risks section of their 10-K filing:

Those risks are spelled out in the 10-K filing for legal protection if things don't go to plan (which they may very well not have done).

But it stands to reason that both GTAT and Apple believed strongly that things would go to plan, which is why they entered into agreement and made the investment, respectively.

This is what I don't understand, if they are interested in preserving the business why not continue the Arizona plant

They haven't made any money for the past 2-3 years, and could have gone big with this Apple contract if they are able to produce.

Them winding down this business with no other plan to make profits is maximising.

If the issue is the quality of the material produced by GTAT (and I fully admit I do not know), then perhaps GTAT feels they cannot meet that quality requirement without significant additional investment - investment Apple may not be willing to make and GTAT is unable to make.

 

[HobeSoundDarryl]

Wow, a huge black eye for Tim Cook, allowing a supplier to get leverage on them like this, and taking their money to boot.

The "money taken" is nothing relative to what Apple makes. They spent $3B on Beats to buy some of the lowest-rated headphone technology OR the relatively low revenue streaming business OR 2 guys (depending on who chimes in).

Someone do the math on how much Apple makes per day and then compare it to how much Apple might have lost in this if they don't see $1 come back to them. Then someone convert it to a percentage like we were spinning bent phones vs. 10M phones sold. It's going to be nearly nothing.

Some of you guys make it sound like this is Apple last few hundred million dollars.

And there's no "black eye" for Cook either. This will cease to be a story as soon as the next big distraction (probably the new Apple announcements) hit. If you want an Apple black eye, go back to the book pricing arrangement. That was Apple behaving badly at the consumers expense (but spun here of course as preventing Amazon from establishing some kind of monopoly by selling books at or even below cost AND/OR the U.S. Justice Department blowing something way out of proportion (because Apple could not possibly do wrong)). That concluded poorly for Apple and was IMO a "black eye" but we barely even remember it now.

THIS will be quickly forgotten like Ping or Apple suing the polish deli for having a URL a.pl (with the pl being the country code for Poland): http://www.pcmag.com/article2/0,2817,2409669,00.asp Remember those? No? Wait about 3-6 months (maybe weeks) on this story and see if we remember this.

 

[HyperZboy]

if it was so "burdensome & oppressive" to be a supplier for Apple, outside of going into an agreement with Apple in the first place, why would the CEO take almost $160K of stock value out of the company if its agreement with Apple created no value?

You can whine about this all you want, but it has no bearing on the Bankruptcy case. Right now he's only one less investor owed money and irrelevant to the case. The SEC would handle improper stock transactions, not here. And so far from the filings I've read, they are within reason.

This is simply GT vs. Apple. Don't mix apples and oranges.

 

[SamuraiArtGuy]

You know...

...it's a hot topic when the number of pages gets longer faster than you can read the tread.

That said, sure looks like something crashed and burned here. High Tech manufacture is neither for wimps, clowns, or incompetents. And there is a rising scent of all of the above with a fine shellack of greed. The CEO unloading a PILE of stock has a shifty look to it.

The information superhighway is littered with the corpses of tech companies that crashed and burned, or just skidded off the road and never back got up to speed. This [redacted] happens, yo.

 

[The Monkey]

Interesting. At $0.81 per share, thinking about buying 15,000 shares and see where the ride takes me.

Why on earth would you do that?

 

[ThisIsNotMe]

I just bought @ 0.78, could be my chance of retirement.

Seriously though. If GT is able to force renegotiation with Apple while discharging debt in Chapter 11, stock could take a swing. Only has to hit $2 to make me a happy boy.

 

[Solomani]

Tim Cook tried to be so patriotic, the much delayed Mac Pro being assembled in the USA, now his home made Sapphire is turning into a nightmare.
Maybe he should have used foreign companies to do the job. I love Apple, but this is quite amusing from a European point of view.

Weak argument. This could have happened from any supplier from any country. Are you saying that a deal could not have gone bad if they tried to do this with a Chinese or Russian company? LOL Russian company. LOL. Wait I'm still laughing at my own statement.

Russian Sapphire Corporation: "Yes, Mister Cook. We at Rossiya Sapphire Ltd will absolutely deliver you ALL the sapphire panels you wish, in timely manner! Yes, our factories and workers in reliable Crimea….err…oops… I mean…. Saint Petersburg, will definitely get the job done! Sapphire so great, so wonderful, so strong, we extract it from the largest meteorite craters in all of Siberia! Our sapphire so strong, it can even beat Mister Putin in arm-wrestling! Da, it is THAT strong, Mister Cook. 18 billion rubles is all we ask, such a great deal, da?"

 

[Boatboy24]

Interesting. At $0.81 per share, thinking about buying 15,000 shares and see where the ride takes me.

That would have been a great idea two days ago. Now, I'm not so sure.

 

[3282868]

The process for growing sapphire boules using the ASF system technology requires that the system be supplied with a consistent supply of power during the cycle required to grow a boule. If there are power interruptions, which we have experienced at our Salem and Merrimack facilities, even for a brief period of time, the sapphire boule being generated by that system will be of inferior quality and we would likely be unable to sell that sapphire material to a customer. Our Arizona sapphire material facility will have a number of ASF systems operating and the power demand will be significant, in particular, at that location and if the power is not consistent, we may breach our material delivery commitments and the consequences could include accelerated repayment of prepayment advances made to us and payment of damages to Apple. Such power interruptions at our facilities could also delay and impair our research and development efforts with respect to sapphire material and ASF systems.

My immediate thought: "Why don't they have backup generators in case of a power outage?" If "a consistent supply of power during the cycle required to grow a boule" is crucial and "power interruptions, which we have experienced at our Salem and Merrimack facilities, even for a brief period of time, the sapphire boule being generated by that system will be of inferior quality and we would likely be unable to sell that sapphire material to a customer", then why the heck don't they have backup power systems in place (esp. as this has happened in their Mass. plant)?

Is this also a plant Apple supplied solar panels to for power? I know they did for a couple of Texas and Arizona facilities, but those could be server farms. Reading the rest of the contract, it seems they bit off more than they could "grow", mismanaged their facility and made promises they knew they may not meet. In all, a badly managed facility that was ill-equipped to meet the obligations they agreed upon and possibly did so to receive capital from Apple.

 

[FriednTested]

Maybe it wasn't oppressive & burdensome going in but became that way during the engagement. What's the marriage statistic? About 50% of marriages end in divorce. In the divorce and afterward, both parties often have some pretty terrible things to say about their ex. However, going into the marriage, the view of each other is just the opposite.

This is the about the 5th thread on this topic. As always, each is packed with the usual sentiment against the party that is not Apple. The most common rationale spun is that the CEO sold stock which obviously makes him guilty. Of course, Apple execs are selling Apple stock like crazy but that's "normal". One exec selling all of his stock has spun "best product pipeline in 25 years". Why sell stock if it's the best product pipeline? Why not hold it a little longer and take advantage of the extra gains on the strength of that pipeline reveal?

Yes, I know- it IS normal for executives to sell stock in their company and there's nothing wrong with Apple execs selling their Apple stock. But, the same should apply to this GT CEO selling some GT stock. Instead, we want to spin conspiracy against the player that is not Apple and that sounds so good we'll just keep spinning it.

A few days ago we read that Apple was supposed to give the company something like $139M dollars but chose to withhold it. If you had a relatively small company who might be depending on that $139M cash infusion and your client withheld it, that might indeed be called "burdensome". Going forward without an infusion of that much cash would likely be quite the burden... especially if you were locked into some kind of exclusive relationship that somewhat tied your hands as to what else you could do (as has been implied since). If that's the case, such exclusivity might be called "oppressive"- a great big company with such a tight hold on a small company that the small company has no good options but the one it's taking.

None of us know for sure but if judgement was passed on collective sentiment, it seems the non-Apple player would already be tarred, feathered, whipped, hung and toasted. Meanwhile the Pope should be awarding sainthood on the first corporate entity in history because they could certainly have nothing to do with anything bad happening here.

Some amount of facts will eventually come out. I suspect it's not nearly as one-sided as the sentiment in these threads would imply.

I'm not sure your analogies fit perfectly... Yes they are close... But, I have my reservations...

I'm 33... Been a part of running 3 family businesses (all manufacturing units working for bigger companies) since 16... Running them solely since 4 years... So I have some knowledge (quite a bit if actually) for working for giant companies like Cipla and the likes... Although not as big as Apple they are huge for small service industry men like me... They work with contracts too... Referring to my experience I can say that the top management bit a whole lot more than they could chew...

This is like an iceberg my friend... A lot more deeper than meets the eye... And I'm sure we the ordinary common people will never know the whole drama...

Edit: I figured my 160 million figure was wrong...

 

[BSben]

Weak argument. This could have happened from any supplier from any country. Are you saying that a deal could not have gone bad if they tried to do this with a Chinese or Russian company? LOL Russian company. LOL. Wait I'm still laughing at my own statement.

Russian Sapphire Corporation: "Yes, Mister Cook. We at Rossiya Sapphire Ltd will absolutely deliver you ALL the sapphire panels you wish, in timely manner! Yes, our factories and workers in reliable Crimea….err…oops… I mean…. Saint Petersburg, will definitely get the job done! Sapphire so great, so wonderful, so strong, we extract it from the largest meteorite craters in all of Siberia! Our sapphire so strong, it can even beat Mister Putin in arm-wrestling! Da, it is THAT strong, Mister Cook. 18 billion rubles is all we ask, such a great deal, da?"

It is still amusing. When some French Apple Store staff went on strike some time ago there was a massive hatred on this forum against the whole of Europe. Now we can relax and enjoy the show. And to be honest so far the Chinese, Koreans etc. have made amazing stuff for Apple. There would be not even the first iPhone without them.

 

[HobeSoundDarryl]

In any case, I'm sure Apple was the dominant party in negotations, but there is no obvious reason why they would want a supplier to go out of business, either. Heck, they are still doing a significant amount of business with Samsung even as lawsuits continue over their IP disputes.

Right. All these threads are just full of speculation (biased against the non-Apple entity of course). My speculation is that neither Apple nor GT wanted this result. I suspect Apple wanted Sapphire screens for the 6+ and maybe the 6. I suspect the little GT wanted the huge, profitable business being the supplier of that would yield AND a share of the Apple Halo for being "in" with Apple on what would have been a highly-touted innovation. I suspect GT just couldn't get the job done by when Apple wanted it done and couldn't survive without Apple's $13X million until a 6s or 7.

No small company CEO wants to bankrupt his company. It's rarely an offensive strategy (as it can sometimes be for much bigger companies). He'll lose his CEO paycheck, his stock will be worthless, his reputation as CEO will be one that can bankrupt his company, his decision-making as CEO will be viewed as questionable, his life in the short-term will probably be very stressful and likely dealing with "hate" from shareholders and soon-to-be unemployed friends as well.

I suspect it was a swing-for-the-fences play that struck out- a get-rich-or-bust play with one of the most high profile companies in the world. It didn't work and now he'll pay the price much more than the rumored $160K he collected on selling some stock in more limited future opportunities and short-term pains from many angles.

Meanwhile, Apple can probably make up for what they put into GT by switching to LED bulbs in place of incandescents or bidding out their basic office supplies and getting a lower cost.

 

[tjleonard]

There is more to this story, to find out who is at fault, if there is any fault at all. It could have been the fault of a third party that caused GT to miss its targets or GT's own issue. A judge will be the one who cleans up the mess, the only losers will be the employees.

And shareholders...

 

[UnfetteredMind]

Those risks are spelled out in the 10-K filing for legal protection if things don't go to plan (which they may very well not have done).

But it stands to reason that both GTAT and Apple believed strongly that things would go to plan, which is why they entered into agreement and made the investment, respectively.

Understood, but every possible way this could go bad, appears to lead to GTAT's doom. The only way they make out is if everything goes perfectly It just seems like a bad deal to me, perhaps only because in hindsight, it's all gone to hell. They're even putting their IP on the line that could end up with competitors. Even if they meet milestones, Apple has zero commitment to purchase. They state that the production and processing are difficult (even short power fluctuations could damage the sapphire boule), that they have little experience manufacturing the sapphire and nothing even remotely of this scale. Oy.

My guess is they will be fighting to keep their IP and to be able to sell the sapphire they've produced (or are in the process of producing) as well.

 

[HyperZboy]

'Oppressive and Burdensome' agreements WHICH THEY NEGOTIATED AND AGREED TO.

Sheesh, who would want to do business with them?

You can say this until you're blue in the face, but neither Apple NOR GT will decide the future of these agreements.

THE BANKRUPTCY COURT WILL. Hence Apple's "surprise."

Any or all of these agreements can be thrown out in bankruptcy court.

My theory is GT called Apple's bluff. Under bankruptcy, if they get out of it, their contracts with Apple since Apple didn't buy, would be null and void and anybody like Samsung could buy GT if they assume the investment debt.