back to article Apple on the art of the deal: 'Put on your big boy pants and accept the agreement'

GT Advanced Technologies (GTAT), the materials company that was once tapped to produce scratch-resistant sapphire glass for Apple's iPhone 6 and iPhone 6 Plus, has filed new papers in bankruptcy court describing the circumstances of its business's collapse – and it places the blame squarely at Apple's doorstep. In a jaw- …

  1. VeganVegan

    Wearing big boy's pants

    Does that also mean taking off the rosy glasses, overcoming the greed for potential big bucks down the road, and simply telling Apple to take a hike in the first place?

    If the terms and conditions were so awful right from the start, it takes an idiot to sign on the line.

    1. Anonymous Coward
      Anonymous Coward

      Re: Wearing big boy's pants

      Hold up here buddy, be careful to call out the pot, but not the kettle.

      I'm not sure if this company was being greedy as much as being optimistic for it's companies future. Sometimes a risky but great deal does come up for you, your company, and your employees. Question is: If you take a risk for a brighter future, do feel safer doing that with TomCat industries, or the highest value company in IT?

      What about Apple? Fuck! To me I see greed, extortion, arrogance...you know, the typical Google, Microsoft, Apple bullshit we've seen in the past. However, Apple clearly knew what situations to expect, and set themselves up to properly and legally fuck over a company, all the way to the grave. I can't say that Google, Microsoft, or whatever hasn't or won't do this, but it's 2014 and Apple is UNDOUBTEDLY doing this. So, fuck Apple!

      P.S. 70% of the people I know that have a iPhone, have a busted screen, so that company better readjust if they ever choose to start again. Also, if I was that company I wouldn't be surprised if the U.S. government just rubber stamped the papers and moved on, Apple apparently is already NSA/U.S. government gold.

    2. Anonymous Coward
      Anonymous Coward

      Re: Wearing big boy's pants

      If the terms and conditions were so awful right from the start, it takes an idiot to sign on the line.

      Sign without taking precautions - definitely. Sign with precautions - why not. The normal method in a "sticky" situation like this is to spin-out the affected unit as a limited company in its own right. If it wins, you re-absorb it. If it loses you write off the losses without taking the mothership down with it.

      What happened here shows lack of trivial business knowledge, lack of accounting knowledge and hubris of monumental proportions. Anyone in the C-team should be on the dole for life. Unfortunately, they will not be and they will all go and ruin some companies shortly thereafter.

  2. Hud Dunlap
    WTF?

    And they signed the agreement why?

    My understanding is that the company was doing ok before the Apple deal. I keep going back to the story that the CEO started selling stock in February and selling some every month. Netted about $10 million.

    1. Alan Denman

      Re: And they signed the agreement why?

      small share sales.

      Tim Cook and mates sold $143 million at peak.

      Its all automated years in advance. Stock options are like deferred wages to be cashed in slowly and automatically.

      That is what they all do

  3. Clark Griswold

    "Apple advised that (a) GTAT's management should 'not waste their time' trying to negotiate as would normally occur in commercial transactions because Apple does not negotiate with its suppliers and (b) GTAT had to agree to all of Apple's material terms and the draft agreements prepared by Apple's attorneys, or the deal was off," Squiller said.

    Umm did someone tell Squiller that that he was still actually negotiating when he was told the line that they don't negotiate? What did he expect apple to say? Perhaps this:

    "As this is a specialist product you are manufacturing and suitable supplier choices are limited we are willing to concede on some key points if you stay strong in your negotiations, this would be detrimental to our business but would boost your companies bottom line!"

  4. Jyve

    Cheapo sapphire machines?

    How can I get a sapphire making machine on the cheap? This could sort out the wife's birthday/xmas/anniversary prezzies for decades.

    1. Raumkraut

      Re: Cheapo sapphire machines?

      Just wait a little while and you might be able to pick up one of the good ones that GTAT's creditors will force them to sell off.

      If you get there before Apple snap them all up for a song, that is.

      1. Anonymous Coward
        Anonymous Coward

        Re: Cheapo sapphire machines?

        Apple is the main creditor, so they'll likely end up with them, but won't do them (or you) much good since they probably require a fair amount of expertise to operate.

        1. WatAWorld

          Re: Cheapo sapphire machines?

          IF Apple ends up with them, Apple can create a subsidiary, hire the former staff back at reduced wages, and take the manufacturing profit itself.

          It could also ensure the sapphire could not be sold to competitors.

  5. tempemeaty

    This is such a sad mess

    It looks to me like Apple made things worse for GTAT down the line than it looked like they were going to on the onset. I hope GTAT recovers.

  6. Steve Todd

    Two sides to this

    The Apple documents that were revealed at the same time show GTA repeatedly failing to hit targets that should have caused Apple to withdraw financing earlier. GTA over promised and under delivered, then acted all hurt and surprised when Apple refused to keep funding them.

    1. DavCrav

      Re: Two sides to this

      There are indeed two sides to this, but usually, when there's a guy dead and someone holding a gun, I normally don't treat both stories with equal trust.

      1. Steve Todd
        Stop

        Re: Two sides to this

        Neither side is dead and they are both holding guns (admittedly GTAs is smaller caliber)

  7. sleepy

    Just the usual brutal negotiations in a high value contract. I certainly wouldn't want to be an Apple supplier. Up front money came from Apple, so Apple wrote the contract. Despite the legal terms, Apple has, Mafia capo style, historically been supportive of suppliers who despite best efforts, are in breach. Apple has presumably lost more dollars than GTAT, and Apple will have greater difficulty in negotiating future supplier contracts. It's not as if Apple has obtained some benefit here. It's the usually hidden side of Apple's efforts to slow down the "fast followers" copying its product innovations: ensuring that copiers can't get volume supplies and can't get competitive pricing for the first couple of years.

    1. Adam Foxton

      That just means the followers change tactics

      In the main, this seems to be by inventing things before Apple...

    2. Anonymous Coward
      Anonymous Coward

      Apple wanted the furnaces

      Early spats hinted that Apple was happy to take over the factory to 'protect the jobs' whilst GT ceased to be.

      The whole scenario was brittle. We now know there was little give to go with the bend

  8. 45RPM Silver badge

    It'd be a odd kind of plaintiff who didn't try to present themselves as the entirely innocent party, but it seems to me that (despite protestations to the contrary), GTAT has smoked the cigarettes and is now acting all surprised that it's got lung cancer. The warning was on the packet, chaps, didn't you read it?

    I've been in a few negotiations with big businesses trying to buy my product. I never see reading the contract or negotiating as a waste of time - so I'm amazed that GTATs management and council apparently decided that they could skip being diligent. In most instances I find that the bigger party digs their heels in and won't change any of the contract in my favour - so then I walk away. Others are happy to make changes to suit both parties.

  9. Mage Silver badge

    GTAT may have been idiots

    But if half true, then Apple are evil corporate bullies and their gadgets may be built on blood, sweat and tears paid for below market rate.

    1. Anonymous Coward
      Anonymous Coward

      Re: GTAT may have been idiots

      "But if half true, then Apple are evil corporate bullies and their gadgets may be built on blood, sweat and tears paid for below market rate."

      In which case, what is this story doing on a news site?

  10. el rekrab

    Wow

    So much for taking responsibility for our own choices.

  11. Anonymous Coward
    Anonymous Coward

    Wow! Big businesses are bastards!

    And we are surprised by this? If we really cared we might have spent a bit more time and money supporting the likes of OpenMoko and other attempts at Open Source mobile hardware.

  12. Anonymous Coward
    Anonymous Coward

    Not a lot 'Imagination; out there is there?

    So now we know how that Brit GPU maker got permanently nailed to the floorboards.

  13. Anonymous Coward
    Anonymous Coward

    Bully boy tactics from Apple...

    Despite not following all the small details of how his situation developed, it all sounds like typical aggressive US company "negotiating" policies....goading suppliers with the prospect of gold at the end of the rainbow, while in the meantime, forcing them to take certain steps which are not in the best interests of the supplier.

    It's a matter of shameful greed from the buying company, (getting goods cheaper than true market value and minimising the potential sale of the suppliers goods to other business) and most likely, forcing suppliers into corners from which there is no escape.....and sadly, I've worked for a supplier who was forced into receivership by a US company who actually just wanted to buy the company on the cheap, rather than what they claimed which was to work "in partnership".

    A/C as I still work in the same industry and I don't need US lawyers on my back over my "claims" (which are true)..

  14. JeffyPoooh
    Pint

    Remedial Reading: The Art of War

    And sign up for some Karrass ("In business as in life, you don't get what you deserve, you get what you negotiate.") negotiation training while you're at it.

  15. Anonymous Coward
    Anonymous Coward

    People assume Apple literally forced them to sign and GTAT are some poor little 'naive' company - hardly - they should take responsibility for a contract they agreed to - even if now they feel the terms were harsh.

    But what do they expect - Apple were stumping up 578 million dollars (think by the time it all fell apart they had handed over in excess of 400 million dollars). They thought Apple would let them make product for other people using the equipment they were financing and not keep to their side of the deal.

    This is not some unfair 'consumer' contract - this was a very large business to business deal and seems some of these problems may have been disclosed late to the GTAT shareholders?

  16. bazza Silver badge

    Sapphire will happen

    Sapphire-screened mobiles will happen sooner or later. Apple has gone about it in a way where the risk wasn't entirely theirs, tried to do it on the cheap as usual, and has ended up setting back the whole idea by many years. Some one else will likely get there first now.

    1. Philip Lewis

      Re: Sapphire will happen

      "Sapphire-screened mobiles will happen sooner or later. "

      Vertu already have them, but they are hand assembled and in no way mass production. At the present time they exist only as a very expensive option.

  17. Anonymous Coward
    Anonymous Coward

    Blaming Apple does not make a lot of sense - they wanted the product - sure they wanted it at a good price and didn't want equipment they had paid for being used to manufacture for (potentially) competitors - unreasonable? Apple agreed to pre-pay a huge amount to accelerate production etc. and let's not forget this was an agreement with another business over hundreds of millions / potentially billions of dollars.

    1. DavCrav

      "...didn't want equipment they had paid for being used to manufacture for (potentially) competitors - unreasonable?"

      LOANED. Not paid. To be repaid in very cheap, i.e., below cost, product.

  18. Dan 55 Silver badge
    Devil

    Being made to put on Apple's big boy pants

    Those would be the ones with the hole in the bottom?

    1. Velv

      Re: Being made to put on Apple's big boy pants

      No, you're just wearing them wrong

  19. DarrenMunday

    Other side of the deal

    GTAT are not revealing what apple were willing to pay so this looks like only an idiot would agree to the terms as we are only seeing half the story.

    However it does look like GTAT were in a powerful position, if they had stayed out of the deal they would know if a competitor had got the deal they would have their hands tied leaving GTAT to negotiate with other handset manufacturers.

  20. Mage Silver badge

    On the gripping hand

    Maybe 4" sapphire screens inherently crack too easily and GTAT suspects this ...

    Apple a greedy bully and GTAT greedy?

  21. Anonymous Coward
    Anonymous Coward

    As the old saying goes...

    ...whoever wears the biggest strap-on ploughs the deepest furrow.

  22. Henry Wertz 1 Gold badge

    Learn to say no.

    Some people just have to learn to say no. I've heard of companies having similar problems with Walmart -- negotiations similar to:

    "We'd like x units at $y apiece."

    "But, that's break-even price" (or even a slight loss)

    "Well, look how many units you'll be selling... all those stores."

    Sensible businesses will then say "No", since who wants to sell (for example) jars of pickles at a loss? But often times they feel "forced" into saying yes, when of course they had the option of saying "No" all along, and depending on what you're selling (i.e. what competitors there are) they may have been able to negotiate a better deal than "Yes" or "No".

    Same thing here... as a commentor has already said, "Fuck you" to Apple for playing so dirty. But, the negotiator from GTAT should have started crossing out onerous clauses on that contract, and told Apple to put on *their* big boy pants and come back when they're serious.

  23. Anonymous Coward
    Anonymous Coward

    GTAT management greed - incentives gone wrong

    Yeah, Apple is a bully, so what else is new?

    But why would GTAT sign such a one-sided agreement as they describe it? Easy, the board and C-level staff have seen the "Apple effect" before, how a new Apple supplier's stock jumps up big once the world finds out they'll be supplying Apple. And that happens even when some little chip supplier is found to be supplying a 50 cent part, these screens might cost tens of dollars each!

    The game was rigged for them, they knew that the minute Apple approached them. All they had to do was get Apple to sign, even if they had to agree to terms that weren't in the best interest of the company or other shareholders. Once they had a signed deal, they could leak it, watch the stock price climb, and let their scheduled share sales start lining their pockets. When it blows up their face, they can blame Apple, knowing someone will believe they were not at fault and they'll land on their feet - unlike GTAT employees, who lose their jobs and have specialized skills that probably don't have a big market.

    Even Apple didn't win here, they will probably end up the furnaces (being the biggest creditor) but they still need someone to operate them, so this sets them back a couple years at least.

  24. Frank Oz

    So .... Don't.Sign.The.Contract.

    Can't believe it, they enter a seriously bad restrictive agreement of their own volition - and then they expect the rest of the world to pay for their mistake.

    News Flash: Big corporations don't exist for altruistic purposes. Take Note.

  25. Zack Mollusc
    Go

    Serves GTAT right!

    GTAT deserves everything they get for ripping off Apple's inventions - viz the material Sapphire, the concept of screens and the idea of glass.

  26. aberglas

    How is this good for Apple?

    They just lost their supplier, and damaged their reputation with other suppliers. Being pig headed in negotiations is not usually good for a business large or small. But what happens in an Apple sized company is that the negotiators become arrogant and lazy. That eventually brings the big companies down if it is not checked by top management. Thus it reflects upon the CEO.

    So not a good sign for the future of Apple.

  27. Anonymous Coward
    Anonymous Coward

    Corporate Bullies

    This is why I won't ever buy an Apple product again.

  28. phil dude
    Pirate

    legally liable for crap decisions?

    We are all armchair CEO's.... but if the reporting it correct , this would seem like an incompetent management decision.

    a) Make X units without a guaranteed sale? This is BS. I would expect qualifiers for "it must be this good" , but no capital recoup at all?

    b) Don't sell to competitors. If a) was bad news this should be a "well give us $HUGE_ADVANCE so we can pay the wages of our staff while they are NOT making stuff for anyone else".

    I'm sorry, this looks potentially criminally suspicious for management to be that naive. If their technology was any good Apples competitors would be beating a path to their door, just because Apple asked them.

    Does anyone out there know if there are good examples where this happens and companies survive? From my vantage I cannot see why any company would sign that contract....

    Pirates because...we might get boarded by accountants...;-)

    P.

  29. WatAWorld

    Putting on your "big boy pants" meant walk away from the deal

    Big clients with big requests and big orders are a huge risk and care should be taken.

    A lot of times a big contract is simply too risky to accept, unless they are prepared to pay a premium price.

    Management has to bite the bullet and tell its salesperson, "I'm sorry we cannot accept the contract."

    Of course the salesperson might quit over this, but the alternative is facing possible bankruptcy.

  30. WatAWorld

    another case of business people being as self-centered and willfully stupid as Wall St. bankers

    I have to wonder why Apple was so restrictive on this company selling its products to Apple's competitors.

    If this GTAT had a monopoly or near monopoly it could have dictated the contract terms to Apple.

    And if GTAT didn't have a monopoly or near monopoly, why did Apple care who it sold the rest of its production to?

    It seems possibly we are dealing with another case of business people being as self-centered and willfully stupid as Wall St. bankers, gambling away their shareholders companies in return for mega short term personal profit.

  31. Sgt_Oddball

    has no one spotted the elephant in the room?

    He stated that Apple pretty much said they have to use brand x equipment then find out the kits not up to snuff because they haven't had the opportunity to either build or spec their own kit? Not too mention changing the the requirements. It's a pain in the arse with software dev, but when you're buying expensive bits of specialist kit that won't cut it to change the plans or requirements. Basically it's like a government it project.

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