Apple sapphire supplier GT Advanced shocks with bankruptcy filing

Swetha Gopinath, Reuters:

GT Advanced Technologies Inc, Apple Inc's partner in a sapphire glass plant in Arizona, filed for bankruptcy on Monday in a stunning turn of events for a company whose fortunes looked bright only a few months ago.

The stock fell more than 90 percent to 75 cents, wiping out nearly all of its $1.5 billion market worth.

 

Apple entered into an agreement with GT in Nov 2013. The deal included a prepayment of $578 million, which GT is scheduled to repay over five years starting in 2015. As the Reuters' article points out:

GT said on Aug. 5 it was expecting Apple to pay it $139 million in connection with the plant. Apple had paid it $439 million totally as of that date.

In addition, Apple invested over $100 million in an Arizona sapphire manufacturing facility.

 

In light of the above, this quote from February by analyst Alberto Moel is interesting:

For Apple, this transaction is an opportunity to lock up the supply chain in a technology that Apple has decided is important as a differentiator of its product portfolio or product performance. How exactly remains to be seen, but the relatively small amount of money involved (from Apple’s perspective, with its $142 billion net cash hoard), and the fact that Apple carries effectively zero risk in the transaction, makes it worth Apple’s attention. Effectively Apple has entered into a supply lock-up and technology hedge for zero or very little relative cost. If it does not work, either because the technology does not deliver, or consumers do not care for it enough to pay either with better margins or higher unit shipments, Apple is out at most a small amount from its pocket.