Matt Margolis – 2/21/2014 (I am long GTAT and I have no plans to add or sell any holdings over the next 72 hours)
I pulled one amazing quote out of the archive from May 2, 2013 during GTAT’s Q1 2013 conference call. If there are any questions left as to what GTAT is selling Apple they can be put to bed now. The sapphire cover screen deal between Apple and GTAT was leaked by GTAT’s CEO on May 2, 2013.
Thomas Gutierrez – May 2, 2013 during the Q2 conference call Q&A
Oh, I mean, it’s all driven by adoption in the cover screen industry. I mean, we’re extremely pleased to, as Jed put it, to have established our first beachhead that demonstrates the value of sapphire in one of the served markets. And as we said in our prepared remarks, there’s is a very, very, very large players that would drive an extraordinary level of business for us. And then there are other players that have multiple models that could step into the market with a single premium model that has sapphire. And our belief is that those are the kinds of orders that will convert first. Because, quite honestly, the supply chain, to be able to serve those bigger players, is not yet in place and we don’t expect to see that start to occur until 2014.
Gutierrez described Apple as a “very, very, very large player,” that was interested in sapphire cover screens. Gutierrez officially tipped his hand on May 2, 2013 that the Apple sapphire cover screen deal was in the works. He told everyone, who was paying attention that sapphire cover screens for Apple would not be ready until 2014. He also informed everyone, that this massive sapphire cover contract would require more capacity than the entire sapphire industry.
The only question left to answer on this deal is how much annual revenue will an “extraordinary level of business” generate for GTAT from Apple’s cover screen contract?
$1B? $2B $5B? I guess the answer depends on your own definition of “extraordinary”.
I’ll leave you with one more telling quote from Gutierrez from May 2, 2013. He told everyone that GTAT will be moving “more and more towards a book-and-ship model”. My obscure analyst translation is that GTAT will be making a charge into additional materials’ contracts as a diversification strategy away from being just an equipment provider. I believe their first target is sapphire for LED and a deal in this space could be announced as soon as Monday (2/24/14).
Our business will be shifting more and more towards a book-and-ship model. Even in poly, as we get perfunctory treatment of some of the technology that we’re shipping, it shifts more to a book-and-ship model. And so revenue converts to cash more readily as you move closer and closer to that type of business model.