GT Advanced Technologies Inc Reveals $50M Penalty By Apple

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GT Advanced Technologies Inc Reveals $50M Penalty By Apple

GT Advanced Technologies Inc (NASDAQ:GTAT) could have had to pay a $50 million fine if it leaked information about Apple Inc. (NASDAQ:AAPL)’s products. That penalty was revealed in court documents according to the Financial Times‘ Tim Bradshaw.

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GT Advanced Technologies’s lawyers apparently want to reveal even more information about Apple’s policies in dealing with its suppliers, one of which is a sizable penalty for leaked information.

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GT Advanced Technologies in court

GT Advanced Technologies Inc (NASDAQ:GTAT) filed for bankruptcy suddenly last week, surprising all of Wall Street. The company is expected in court on Wednesday for a hearing. Today though, the sapphire glass manufacturer’s lawyers are attempting to get even more information about the company’s non-disclosure agreement and relationship with Apple.

They argue that the information should be published so that shareholders and creditors are aware of Apple’s demands.

Apple’s demands “oppressive”

Last week in its court filings, GT Advanced Technologies said Apple’s supplier agreement is “oppressive and burdensome.” The news is quite surprising to investors, as Wall Street was excited last year when Apple loaned the company hundreds of millions for its sapphire glass making operations.

It’s still unclear just why GTAT filed for bankruptcy, but the fact that the company is trying to get so many details about its relationship with Apple into court is interesting. Also GTAT seems to be trying to place the blame for its bankruptcy filing squarely on Apple. Some analysts considered last week that Apple might actually be to blame.

Shareholders have also filed a class action lawsuit against the glass maker, alleging that it “misrepresented and / or concealed” its financial position.

Does Apple squeeze suppliers?

The Financial Times reports that margins at Apple suppliers are pressured, with none of them being able to see higher profit margins than Apple. Partners that have worked with the company for a long time are used to the way Apple works, mostly because they have ridden on the back of Apple as it has grown so large so fast.

Apple, however, doesn’t leave much room for suppliers to make mistakes. As a result, the report suggests that GT is the first of Apple’s thousands of suppliers to sustain such serious financial problems after partnering with the company. But even though other suppliers have so far been fine, smaller ones might be starting to become concerned.

Will GTAT get its way?

GT Advanced Technologies Inc (NASDAQ:GTAT) lawyers are undoubtedly hoping that shining light on Apple’s demands for its suppliers, its bankruptcy case will be helped. If they win the right to share more information about the agreement with Apple, then there could be details about the specs of the sapphire it makes.

Those specs could give away details about what Apple is planning for future products, as well as costs and pricing. Other suppliers might be able to use those numbers as leverage in future margin negotiations with Apple.

Investors will also be watching this case, as judges will have to consider corporate confidentiality rights compared to creditors’ rights in the case of a bankruptcy.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@valuewalk.com.
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21 COMMENTS

  1. The article says the company is now in bankruptcy… I hope you’re being sarcastic… Who would want to ride someone’s coattails into bankruptcy?

  2. There is NO LOAN!!!!

    I don’t know why an author doesn’t do some due diligence before they parrot what somebody else said.

    What Apple has done is prepayment for sapphire product, with the stipulation that the prepayments had to be spent on equipment and other things for the Arizona Plant. The prepayments are backed by the physical assets of the Arizona plant along with the financial assets of another division of GTAT.

    In addition Apple has contracted GTAT for some of the IP used to make sapphire with an option to purchase the rest. Apple can, if they so desire, have all of GTAT’s IP for sapphire production, and they already own the physical plant building. They can, if they wish, hire a subcontractor to run the plant (after the BK smoke clears).

  3. All corporations are sociopath…they have a fiduciary responsibility to their shareholders to be that way.

    Walmart has been accused of similar predatory and abusive behavior towards their vendors/suppliers. In fact, there was a documentary about how they do business, it was so viscous.

    But that’s how companies work.

  4. You’re analogy only works if one assumes GT was not fully disclosed to the requirements of Apple. If that’s the case they are in the right. But you’re assuming things that have yet to come out in court.

  5. Have you ever been hired at a company that tells you what your job duties are then after working there for a while you find out it’s not like they said it was?

  6. Did GTAT leak secrets resulting in a $50 million penalty? Otherwise why did they reveal that penalty? Does revealing that penalty result in a $50 million penalty?

    Sounds like amateur hour in GTAT right now, but I heard the CEO sold a lot of stock while it was high, so maybe accepting the contract and the hype was a good thing for him even if they never intended to fulfill the contract.

  7. Here’s a tip: don’t leak secrets that you’re contractually obligated not to leak.

    Is a little bit of professionalism too much to ask for?

    A leak could cost Apple shareholders a lot more than $50 million.

  8. First, off that book has been thoroughly discredited. Second, the supply chain management as it currently stands began long before Steve Jobs’ death. Tim Cook is a master of supply chain management and used it brilliantly with iPod, iPhone, and iPad suppliers. And most importantly, the point everyone is raising is that nobody is forcing these companies to sign deals with Apple. They do so willingly because even with thin margins the sheer quantity of components they sell to Apple is astronomical. Apple’s loans would have single-handedly transformed GT Advanced into a massive producer of sapphire. If GT Advanced overpromised on their capacity for the iPhone 6 and then underdelivered, that’s not Apple’s fault. If GT Advanced was ready but Apple decided not to use sapphire screens for technical reasons (e.g. their being brittle) and they didn’t put a clause in the contract to protect against that, well that is just poor business management by GT Advanced. If they did meet contractual obligations and Apple reneged on the contract then they will have a real lawsuit. But I doubt it.

  9. Seems you love Apple for insane reasons. No matter what, *always* painting Apple as the good guys, all the others as the bad guys, does not help increase your credibility nor make yourself more believable

  10. oh yeah, and HP, Samsung, Google, Asus, Microsoft are angels on earth, they let suppliers screw them. They are so happy when they are screwed by their suppliers that they throw parties. Dear Dylan, if you hate Apple for insane reasons we understand. If you have an agenda saying that we understand too, but painting Apple as the bad guys just because you hate them is stupid. By the way, the book you mention is stupid too, because if Apple was merciless was on Steve’s era. No one more ruthless with anyone screwing Apple than Steve. Apple is hiring a supplier to do what they need, how they need. If you are a supplier and don’t want to be controlled don’t take the order. Next time you hire a contractor to do your home and the contractor screw you, throw a party. Don’t be pissed with the contractor.

  11. If GT accepts a supplier agreement from Apple how can they plead ignorance later on and blame Apple for the “oppressive” demands? If GT accepts a loan from Apple is Apple not entitled to give more scrutiny on GT’s operations? No one is going to deny whether or not Apple has oppressive/unfair policies from their suppliers, but how can a judge or jury expect these suppliers to not understand the terms of the agreements before signing? You can’t complain after about getting screwed when it’s upfront and clear at the beginning.

  12. Uh…actually no…Apple cannot retaliate against or “fine” a company for what is said in a court of law. Please don’t comment anymore.

  13. Well, at this rate, GT Advanced may request documentation from Jonny Ive to satisfy the bankruptcy court trustee’s requirements for the proceedings.

    Jonny Ive can lie on the stand (like phil schiller did) and what it was that he did to the design at the last minute that caused HairGate.

  14. Apple operates as a completely sociopathic corporation. They are absolutely merciless with all their suppliers. Read Haunted Empire: Apple After Steve Jobs by Yukari Iwatani Kane.

  15. If there is “material information” in the agreement that can impact the business then the stock holders need to know. The bankruptcy judge should allow GTAT to disclose that information.

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