GT to cut jobs, wind down sapphire plant; takes aim at Apple (updated)

Rubicon Technology

10/10/2014 20:49

By Tom Hals and Manya Venkatesh 
    Oct 10 (Reuters) - GT Advanced Technologies Inc  GTAT.O  
said it will cut 890 jobs, close an Arizona plant expected to 
make scratch-resistant screens for Apple Inc  AAPL.O , and 
suggested it could pursue legal claims against the iPhone maker 
while revamping under bankruptcy. 
    "Only if GT winds down these operations will it be able to 
stop its mounting losses and re-focus its resources on the 
operation of its core business of selling sapphire furnaces and 
other products," the company said on Friday. 
    GT Advanced said it was burning through $1 million a day at 
the operations it intended to close. 
    "GT believes that it has many claims against Apple arising 
out of its business relationship with Apple," the company said 
in a filing with the U.S. Bankruptcy Court in Manchester, New 
Hampshire. 
    The company said it could not pursue the unspecified claims 
at the outset of its bankruptcy, but that the claims would allow 
GT Advanced to terminate several Apple agreements that it said 
were burdensome and of no value. 
    Apple responded by pointing to its earlier statement that it 
remains committed to preserving jobs in Arizona and was 
consulting with state and local officials on its next steps. 
    Shares of Rubicon Technology Inc  RBCN.O , a rival maker of 
sapphire material, surged about 23 percent to $4.93 on Nasdaq. 
    "It looks like if GT has its way, they will wind down their 
sapphire operations, and that's a positive for the industry 
generally, and more specifically, as a primary supplier, for 
Rubicon, too," said Andrew Abrams, an analyst at JG Capital. 
    However, Srini Sundararajan of Summit Research said 
Rubicon's rally was "an over-reaction to GTAT shutting down."  
    GT Advanced filed for Chapter 11 bankruptcy with little 
warning on Monday, sending its shares plummeting 90 percent to 
below $1.  ID:nL3N0S130Y     
    The company has provided only scant details of the cause of 
its bankruptcy and turnaround plans.  ID:nL3N0S44AF  
    The company said in Friday's court filing it needed to wind 
down operations in Mesa, Arizona and Salem, Massachusetts as 
soon as possible to preserve its dwindling cash. The process 
would take until the end of the year, it noted. 
    GT Advanced reached an agreement with Apple last year to 
transform itself from a supplier of sapphire furnaces to a 
manufacturer of sapphire for Apple. The iPad maker provided $578 
million in funding for the Arizona plant, and GT Advanced agreed 
to repay the money over five years, starting in 2015. 
    The first sign of trouble came in September when Apple 
indicated its iPhone 6 would use rival Gorilla Glass instead of 
sapphire material. 
    GT Advanced asked the bankruptcy court to end 13 contracts 
with Apple, including a confidentiality agreement that has 
forced the bankruptcy to be conducted with unusual secrecy. 
    GT Advanced would be liable for $50 million for each 
violation of the confidentiality agreement, court papers show. 
    On Nasdaq, GT fell 38 percent to 80 cents, and Apple was 
little changed at $101.05 late Friday afternoon. 
    A hearing will be held on GT Advanced's requests on 
Wednesday in Springfield, Massachusetts. 
    The bankruptcy case is In re: GT Advanced Technologies Inc, 
U.S. Bankruptcy Court, District of New Hampshire, No. 14-11916 
 
 (Reporting by Tom Hals in Wilmington, Delaware; Additional 
reporting by Edwin Chan in San Francisco; Editing by Richard 
Chang) 
 ((thomas.hals@thomsonreuters.com; +1 610 544 2712; Reuters 
Messaging: thomas.hals.thomsonreuters.com@reuters.net)) 
 
Keywords: GT ADVANCED TECH BANKRUPTCY/PLAN