After a lot of headlines, market buss, speculations and controversies things have things finally taken a turn for the better or not?
Apple Inc. (NASDAQ:AAPL) made a deal with GTAT Advance technologies back in 2013. GTAT Advance Technologies produce advanced materials and innovative crystal growth equipment for global electronics. Cracks started to appear when GTAT managers expressed concerns regarding a few terms of the deal during the contract negotiations. Apple responded by saying similar terms are offered to other suppliers and refused to make any exceptions for GTAT. However Apple was committed to get the sapphire technology and expressed its intentions to work jointly with GTAT. GTAT was offered significant opportunities in the deal and thus GTAT elected to proceed.
GTAT was ordered 2600 sapphire growing furnaces at the start of the deal and was supposed to operate the furnaces on Apple’s behalf, while Apple would own them. After a few months of negotiations Apple offered a deal with a different structure; according to these new terms Apple would no longer be purchasing any furnaces from GTAT instead the company would borrow money from Apple to purchase furnaces to grow their own Sapphires. Also Under this new deal Apple will lend money to GTAT without the obligation to purchase any of its sapphires or its materials. At the same time GTAT was forbidden to make any new arrangements with any other manufacturer or supplier.
The contract said that if Apple Inc. decided not to purchase any sapphires still the GTAT would be required to pay full prepayments in cash, otherwise Apple would foreclose on the 2036 furnaces and related equipment. Apple also appears to have an exclusive right of negotiations, which requires GTAT to exclusively negotiate in case of any conflicts with Apple for 30 days otherwise GTAT will be liable to pay $1billion to Apple.
GTAT is also supposed to pay $650,000 per month for the furnaces. GTAT is also bound to fulfill any purchased order placed by Apple and will be fined in case of any delays. If GTAT discloses the agreement then it will be fined under legal action to pay $50 million per occurrence to Apple. The GTATS higher management right before bankruptcy gave higher management of Apple a very detailed presentation highlighting the financial burdens on GTAT by its Sapphire growth project, which even with further negotiations was not resolved.
Apple’s attorney Bruce Meyer said in an interview that the inflammatory comments from GTAT’s COO would further deteriorate Apple’s image if the deal goes public. If the original deal could not be completed it would make GTAT’s position even worse. GTAT submitted a court filing saying that Apple plans to get more than a billion dollars in damaged claims if the judge doesn’t accept a proposed settlement. The GTAT’s shares saw a slight increase on Friday from $0.47 to $0.61 before it collapsed and traded low from of $0.3 to a high of $2.
While Apple Inc. (NASDAQ:AAPL) submitted a number of proposals to settle the disputes, even after strong negotiations none of Apple’s proposals could solve the economic crises for GTAT.
