GTAT: Apple's Agreements Are 'Oppressive and Burdensome'

GT Advanced Technologies (GTAT) said in filings that its agreements with Apple were "oppressive and burdensome." According to The Wall Street Journal, the company told the bankruptcy court that the only way to stop the bleeding was by terminating its deal.

"The cash burn at GTAT’s sapphire manufacturing operations for the benefit of Apple is not sustainable," GTAT's attorneys argued. The filings were part of GTAT's request that came to light earlier that the courts allow it to shutter the sapphire manufacturing facility the company operates with Apple in Mesa, Arizona. GTAT also wants to close its plant in Salem, Massachusetts.

In other words, it's hard being an Apple supplier, and GTAT wasn't up to the challenge.


TMO Artist's Rendering of GTAT's Characterization of Working with Apple

GTAT also told the courts that it believes, "[GTAT] has many claims against Apple arising out of its business relationship with Apple." The company didn't elaborate on those claims, and The Journal noted that the judge hearing the case agreed to seal details of both GTAT's agreements with Apple and the company's explanation of what went wrong.

For its part, Apple issued a slightly different version of the statement the company released earlier this week, saying: "We are focused on preserving jobs in Arizona following GT’s surprising decision and we will continue to work with state and local officials as we consider our next steps."

The earlier version of that statement said that Apple found GTAT's bankruptcy decision surprising.

Apple's opinions on what happened with GTAT have so far not come to light. The company has no doubt offered many such thoughts on what happened between the two companies and in direct answer to GTAT's complaints in its own court filings, but mainstream news outlets haven't yet ferreted them out. There will also be many more revelations to come in the weeks and months to come as this bankruptcy wends its way through the courts.

It's Not Me, It's You

One thing Friday's court revelations did make clear is that GTAT's bankruptcy was part of an effort to divorce itself from Apple. It was less than a year ago when GTAT and Apple announced a jointly operated sapphire factory in Arizona that would be financed by a US$578 million loan from Apple. Apple didn't pay the fourth and last installment of $139 million on that loan when GTAT failed to meet key milestone and technical requirements.

Until now, it was unclear if GTAT intended to or was trying to remain in business with Apple, and Wall Street reacted quite negatively to the certainty that's the last thing GTAT wants.

This new reality could increase scrutiny of GTAT CEO Tom Guttierez's sale of some 700,000 shares of his company's stock from February through September of this year when the stock ranged from some $10 per share to as much as $19.

Shares of $GTAT closed sharply lower Friday at $0.81 per share, a loss of $0.480 (-37.21 percent), on light volume of 70.4 million shares trading hands (that volume is light only in the relative light of the last week's frenzy).

For those keeping score at home, GTAT's market cap is now just $111 million, $28 million less than the total amount of Apple's last installment.

Shares of $AAPL ended the day lower at $100.73, down $0.290 (-0.29 percent), on heavy volume of 66 million shares trading hands.

Image made with help from Shutterstock.

Full disclosure: The author of this piece has been long on $AAPL with a tiny holding for more than a decade. The author also picked up a few shares of $GTAT (as a pure gamble) when that stock collapsed following the bankruptcy announcement. None of the author's miniscule stock holdings amount to much in the way of total assets, nor were they in any way an influence on the writing of this, or any article about any company.