Is Apple Inc. (AAPL) To Be Blamed For GTAT Bankruptcy?

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Apple Inc. (NASDAQ:AAPL) might be partly held responsible for the collapse of the sapphire glass manufacturer GT Advanced Technologies Inc (NASDAQ:GTAT), who filed for bankruptcy protection on Monday. Analysts believe the collapse might have been the result of a “breakdown” in relations with the iPhone maker, says a report from Forbes.

Is Apple Inc. (NASDAQ:AAPL) to be blamed?

Concerns over Apple plan to use the scratch-resistant wonder material in its new iPhones, and the Apple Watch were heightened when the supplier GT filed for the bankruptcy protection. It is believed that the supplier received $350 million from Apple to establish a sapphire glass factory in Mesa, Arizona. In September, after the release of the iPhone 6 by Apple, shares of GT lost 35%

Raymond James analyst Pavel Molchanov believes that GT earned only $31 million in the first-half, and that too from its secondary business of solar panels. “This would be a major liability and GTAT is in no position to write a $350 million check,” noted Molchanov.

Canaccord Genuity analyst Jonathan Dorsheimer, also, shared similar thoughts that Apple is to be blamed for GT’s plight. Dorsheimer believes that the bankruptcy suggests “a failure by GT to meet its own objectives with Apple, which we believe will likely weigh on the company’s ability” to supply sapphire equipment or material.

Love- hate relationship between the two

According to Gilford Securities‘s Nimal Vallipuram, the bankruptcy filing is totally unexpected and might be the outcome of Apple asking for the “prepayment of some loans due” to GTAT as the latter failed to meet the production targets of sapphire.

Vallipuram, further, noted that after Apple launched its new iPhones on September 9, GT would have lowered its revenues estimate from sapphire in 2014 as the material is used only in the watch. “But even after accounting for this, this outcome is radical and totally unanticipated,” said Vallipuram.

Vallipuram further says that if the situation was so bad then both the companies would have revised the agreement to give some more time to GT. “As a result we are forced to suspend our rating as we try our best to decipher this situation……. to untie this knotty issue to find the underlying reason for this action by the company.”

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