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  • GT Advanced Technologies And InvenSense Are Prepping For Tremendous Sales Growth Over The Next 12 Months [View article]

    Just off the top of my head...

    1) Have multiple wheels being shifted along the Hyperion/oven/Hyperion circuit so that neither the Hyperion nor the oven is ever standing idle while the other is in use. (Requires enough material to stock all the wheels, of course.)

    2) Do this in an environment where lots of heat is already being generated for other purposes (like, say, a giant sapphire factory) so that your energy expenditures aren't solely dedicated to heating and re-heating one oven on a sporadic basis.

    Unless the proposed system would violate the laws of thermodynamics (and I don't think this one qualifies), "impossible" is a pretty strong and usually ill-advised word to throw around. "Impractical" or "uneconomic" might very well be accurate descriptions. However, scale makes all kinds of things economically feasible that wouldn't have been on a smaller basis, so why should this be different?
    Sep 22 09:13 PM | Likes Like |Link to Comment
  • GT Advanced Technologies: Is A 40% Fall Reason To Buy? [View article]
    "We are planning to host a webcast in the fall of this year to provide more detail on our Hyperion and Merlin strategic initiatives and the potential we see as these reach maturity over the next several years."
    --Tom Gutierrez, GTAT Q2 conference call, 8/5/2014

    You guys really think they're going to schedule a webcast and trot the CEO out in front of the cameras in order to lower their guidance? Because, releases are broken now, or something?

    C'mon, people, think a little here.
    Sep 17 04:24 AM | 17 Likes Like |Link to Comment
  • GT Advanced Technologies: Is The Street Missing Forest For The Trees? [View article]
    Yes. First you imagine that this is the sequel to their show-and-tell webcast back in March that discussed Merlin, Hyperion, and other non-sapphire things, and that the main focus of this installment will be to talk about how those things are shaping up: What pilot programs are being undertaken with early adopters to move the newer entries toward shipping-product status, where things currently stand with solar and SiC and LEDs and All That other words, a "business update," covering their business as a whole rather than just the Apple parts.

    Then, if you're really optimistic, you imagine that somewhere in the preamble to this, they blow a little dog whistle that says "By the way, we obviously already knew what Apple's sapphire plans were when we reaffirmed our guidance just last month (duh), so everybody just chill the f*** out, okay?"

    Nobody voluntarily schedules a live webcast to deliver bad news. Seriously, who's going to give their detractors an hour of negative video footage to repost and dissect when they could have just dispensed with it in a press release? This will be something more rah-rah.
    Sep 16 09:05 PM | 3 Likes Like |Link to Comment
  • GT Advanced Technologies: Is The Street Missing Forest For The Trees? [View article]

    They already described how they expect to do it in last month's earnings call. The biggest factor is equipment orders; they said they're expecting revenues from sales of sapphire furnaces to be greater than revenues from sales of sapphire itself. (I presume those furnace sales are to customers other than Apple at this point; they do have a large backlog.) Non-sapphire-related business makes up the remainder.

    They also reiterated that the majority of expected 2014 revenues would land in Q4, not Q3. That guidance pretty obviously was NOT based on expectations for a sapphire-iPhone bonanza in September which then suddenly went awry between the earnings call and now.

    The fact that the market was surprised by Apple's announcement does not mean that GTAT itself was. If it weren't possible for them to hit their guidance without having sapphire screens on the iPhone 6, then they wouldn't have issued that guidance one month(!) before the phone was publicly unveiled.
    Sep 16 05:47 PM | 1 Like Like |Link to Comment
  • GT Advanced Technologies: Is The Street Missing Forest For The Trees? [View article]
    "Per the contract Apple has exclusive right to the output so GTAT will have to modulate the output per Apple needs. That would be true until GTAT can get Apple to sign off on an exception to supply to a different vendor."

    This characterization is not quite correct. The process to "get Apple to sign off on an exception" is basically just 1) demonstrate that there will in fact be excess production capacity, based on Apple's stated sapphire demand (not hard to do since both parties will know what the plant's capacity is and what Apple's pending orders are), and 2) document that the third party GTAT intends to sell the excess sapphire to wants it for a purpose other than consumer electronics. Relatively speaking, there are very few players in the market other than Apple who actually DO want sapphire for consumer electronics at this point, so not being able to sell into that niche isn't a huge restriction on GTAT as of yet.

    The suggestion that GTAT would be forced to scale back production and let the plant sit idle if Apple doesn't order enough sapphire during any given period just isn't right. And there's no reason for Apple to want that to happen, either -- if and when GTAT produces sapphire for other customers, their agreement states that they will pay rent to Apple for the use of their equipment and space, so it won't be in Apple's interest to have the plant standing idle when it could be generating revenue for them either.

    On the bright side, the market's near-total failure to understand this has created a pretty fantastic near-term buying opportunity....
    Sep 16 03:44 PM | 2 Likes Like |Link to Comment
  • Corning Gorilla Glass Retains Its Dominance Over GT Advanced Technologies' Sapphire [View article]

    This is the relevant snippet of the Master Development and Supply Agreement that discusses selling sapphire produced in the Mesa plant to other parties:

    "Except as mutually agreed otherwise in writing, the Mesa Facility and all of the Furnaces will be used exclusively to manufacture Goods for Apple. However, if GTAT anticipates that there will be idle capacity at the Mesa Facility, based on Apple’s Forecast, then GTAT can advise Apple of the anticipated amount of idle capacity and request Apple’s permission to use the Mesa Facility and Furnaces to produce and supply sapphire goods to other customers for uses in products other than Consumer Electronic Products. GTAT must obtain Apple’s prior written approval for all such proposed uses for the benefit of other customers. Apple’s approval will not be unreasonably withheld or delayed. GTAT will compensate Apple for its use of the Mesa Facility in an amount to be agreed upon by the parties and which will take into account depreciation costs of Equipment and the Mesa Facility and other expenses. Any such use of the Mesa Facility will be subject to the exclusivity restrictions set forth in this Section 9; any breach of those restrictions will be subject to payment of the liquidated damages set forth in Section 6.3; and GTAT must, on monthly basis, report to Apple the number of sapphire boules produced in the Mesa Facility for production of goods sold to others."

    That's followed by a lengthy stretch of redacted stuff which I believe laid out the details of who they can and can't sell to and for exactly what applications.

    Note that they do have to "rent" the equipment and facilities back from Apple in order to produce sapphire for others, which isn't the case when they're producing for Apple themselves. Depending upon what rates they have to pay for that (combined with the fact that their cost of sales when producing for Apple is effectively zero), selling to others might well be less profitable than if they could be doing 'round the clock production for Apple at all times. But it does still allow them to run a sapphire materials business out of Mesa if Apple's demand is less than they'd hoped for.
    Sep 16 05:15 AM | 2 Likes Like |Link to Comment
  • GT Advanced Technologies Investor Guide To Apple's iPhone 6 Unveiling Event [View article]
    But low prices on something you want to own a lot more of are an even better one. ;)
    Sep 16 03:27 AM | 1 Like Like |Link to Comment
  • Corning Gorilla Glass Retains Its Dominance Over GT Advanced Technologies' Sapphire [View article]

    There are at least two other reasonable explanations for the ongoing activity that people have observed (and continue to observe) at the Mesa plant.

    1) In order to receive the final prepayment from Apple, GTAT has to prove that they've hit the production-capacity targets specified in their agreement. Precise details of the targets aren't known, but it seems reasonable to assume that they'll first be required to demonstrate that they can produce X amount of usable sapphire within Y amount of time, and then show that they can sustain that level of output for some longer period of time (to prove that hitting the target initially wasn't just the result of some "everybody work 20 hours a day for the next two weeks to achieve this number once" fire drill). If GTAT isn't expecting the payment until sometime in October, then it stands to reason that they're still doing the things they have to do to earn it in September.

    2) As I keep saying, their output from the plant doesn't have to be sold to Apple. Any portion of it that Apple wants, Apple will get, but the remainder, if any, can be sold elsewhere. So if Apple's current demand is less than GTAT had originally anticipated, that doesn't imply that they'd idle the factory. Having that massive plant available to them (and allegedly at below-market lease terms) is one of GTAT's major assets and competitive advantages vs. other sapphire producers at the moment. They'd be crazy not to take advantage of it, no matter what decisions Apple makes about their devices.

    Actually, I can think of one more possibility, too:

    3) Apple expects to sell many more watches -- as well as devices with smaller sapphire components like home buttons and lens covers -- than the market is expecting them to sell, and they actually do need all the capacity for it.

    That last one doesn't seem so likely to me, but it's still more likely than the idea that they're going to annoy their customers (including their most ardent fans who have already placed iPhone 6 pre-orders as we speak) by introducing a third, off-cycle phone model that those customers might well have chosen to buy instead of the initial two if they'd known it was coming. Apple has NEVER done that. Unless you believe their primary business goal is to do favors for GTAT shareholders, they would have nothing to gain by doing it this time, either. A $600 billion corporation has a longer time horizon than GTAT day traders do. They aren't going to jeopardize the enormous goodwill they've built up with iPhone buyers just so they can deploy more sapphire in 6 months instead of 12 months. The idea that they would is nothing more than a pipe dream of GTAT short-termers who are having trouble making it to stage 2 of their 5 stages of grief. They'd be better off basing their speculations on something resembling currently known reality, in my opinion.
    Sep 13 05:10 PM | 1 Like Like |Link to Comment
  • GT Advanced Technologies Investor Guide To Apple's iPhone 6 Unveiling Event [View article]
    Fair points. Apart from a momentary interruption in step 1 of your chain, though, I don't see where it's broken. "Deals, new products, fear mongering by rivals" has been ongoing for a while, and not just on the sapphire side of things; see the recently-consummated Qatar deal, the admittedly-iffier-looking Malaysia deal, Hyperion 4, Merlin, etc., etc. "Meaningful shipment of product" will always depend on one's definition of "meaningful," but they are selling furnaces (of various kinds) today, they've sold solar equipment for years, and they are either selling sapphire to Apple already (my guess) or will be very soon. Apple's watch isn't likely to be the next iPod, but I expect they'll still sell a pretty decent number of them (meaning multiple millions), which will make it the first mass-market consumer electronics item with a sapphire display. That's a pretty good proof of concept, and will constitute a meaningful shipment of GTAT's product in my book. "No products are being shipped" is simply not true. More would always be better, of course.

    As a long-termer, steps 4 and 5 are the critical ones for me. Contra what you're saying, step 4 (rising revenue) is still what the company is projecting for this year and through 2016, at last report. (It seems almost certain they knew that sapphire was in the watch and not the phone when they released their most recent projections last month, so apparently being in the phones wasn't a make-or-break issue in their eyes.)

    Step 5 is the big unknown. The only guidance I've heard from them regarding actual earnings (rather than revenues) was for 2016, I believe. So it'll be a while before we have any knowledge of how that actually plays out.

    I'd also suggest that point 1 (the hype cycle) doesn't really have any connection at all with the remaining points. GTAT isn't selling anything directly to consumers; therefore, media hype or the absence thereof has very little effect on their day-to-day operations or their ability to close business. It does affect their stock price, obviously, but for an ongoing buyer like myself, that means negative buzz is actually preferable in the near term. (The positive frenzy that Margolis ignited back in January, for instance, increased my nominal "wealth" a lot, but it had a seriously depressive effect on my purchasing power from that point on. On the whole, I'd have been better off if he'd stayed quiet for a few more months.)

    Anyway, I'd argue that we're somewhere around step 3 in your chain already, with strong hints concerning step 4. Things could change, but if phone screens vs. watch screens was the thing that was going to change them, we'd have heard about it already.

    Regarding insider selling: I agree that it's shitty PR, but the dude's 65 and we don't what he's doing with the money. As that tired old adage suggests, there are a million reasons why someone might sell and we'll never know for certain which reason it was. (He's also not the founder of the company; unlike a Bill Gates or a Larry Ellison, there's no guarantee that he can stay around as long as he likes and write the terms of his own departure when the day comes.) Nevertheless, it looks every bit as bad as you say.

    A lot of the other stuff will become clearer in November and (especially) February. The February earnings release will be the big event as far as I'm concerned; that's where we'll find out whether all those promises of large revenues for the year but landing mostly in the 4th quarter were accurate or not. If those prove to be seriously off the mark, I'll be reassessing my position for sure.

    Thanks for another interesting conversation. Your viewpoint is one that I respect very much and think about very hard. (Not sure if that's evident from this post, but it's true.) I hope things go well enough for GTAT that I'll see you back here at some point.... If not, enjoy the money you made on it. :)
    Sep 13 06:04 AM | 1 Like Like |Link to Comment
  • GT Advanced Technologies Investor Guide To Apple's iPhone 6 Unveiling Event [View article]
    I think you guys are mistaking a bad news cycle for an existential threat. The fundamentals are no different today at $13 than they were a week ago at $18; all that has changed is short-term market sentiment. So why sell now if you didn't sell then?

    If GTAT is unable to produce sapphire at quantity, that would change things. If they produce the sapphire but are unable to sell it, that would change things. I see very little reason to believe that either of those scenarios is going to come to pass.

    The key fact that people keep losing sight of is that they don't have to sell the sapphire they produce to Apple. True, they can't sell it for other consumer-electronics uses, but CE is the smallest and most speculative part of the sapphire market anyway. There is plenty of demand out there for other uses. If Apple were to buy no sapphire at all for the whole next year, GTAT could still simply turn to the global market and say "Hey, we've just produced as much sapphire as the entire rest of the world combined; does anybody want some?" That's a pretty compelling business advantage in my book. No one else has access to a facility like that.

    ban, I recall our talk several months back and I understand your investment approach. I'm glad you made a profit on this. But when you say "the deductive case was getting strong, until this week," I don't see why. If anything had made GTAT's prospects look shakier recently, it was the moment in last month's earnings call when we got a tacit confirmation that they'd run into ramp-up problems at Mesa and an explicit confirmation that Apple's final payment had been delayed because of it. If that didn't change the picture, why would the already-widely-suspected news that Apple will be using GT's sapphire in Product X rather than Product Y suddenly alter everything?

    By the way, the purpose of my buying method in this case isn't really cost-averaging (that's worked mostly against me for the past year since the share price has mostly risen during that time); it's purely about acquiring as many shares as I can while GTAT is still in the "speculative" stage. I don't have any large free blocks of capital to buy more shares with at the moment (the most recent couple of those that I did have were what purchased the bulk of my current shares), so I'm adding shares piecemeal as additional money comes in. If another big chunk of money suddenly appeared, this is what I'd spend it on.

    As I may have said once before, I wouldn't recommend this approach for anyone whose primary concern is preserving wealth, but my primary concern at this point is still generating it. That means taking risks -- ideally intelligent and well-informed ones, but risks nonetheless. Companies that have already proven their value by performing reliably for decades are generally priced to reflect that and therefore don't suit my purposes. What I'm looking for is companies with very high potential, reasonably good odds of fulfilling it (as determined by their strategy, management, "moat," execution ability, and so on), and ideally an unwarranted amount of skepticism from the market at large in order to maximize the surprise factor when their strategy starts to pay off. That described TSLA when I bought it in the low $20s four years ago; I believe it describes GTAT as well (although to be clear, I don't expect anywhere near TSLA's level of price inflation from an equipment-and-materials company). I love companies that everyone thinks are doomed, provided they're wrong about it. :) In this case, I'm pretty certain they are.

    A year from now, do you think people will be looking at GTAT and saying "Oh Christ, if only they'd been in the iPhone 6, they might have stood a chance?" I don't. I think they'll be wondering why they didn't buy this stock back when it was cheap.
    Sep 12 07:44 PM | 4 Likes Like |Link to Comment
  • GT Advanced Technologies Investor Guide To Apple's iPhone 6 Unveiling Event [View article]
    No, I'm not disappointed. Here's why:

    I'm a GTAT investor. I made my initial purchase in January of last year and have bought shares at least once a month, every month, out of present income, since last September. I plan to hold my shares for at least 2-3 more years -- longer than that if their performance and strategy at that time still justifies it; shorter than that only if something about the company's strategy, execution and/or management fundamentally changes for the worse. (Or perhaps if the stock price were to go into some sort of crazy LNKD-style valuation bubble that no longer had any connection to what the company was doing at all.)

    Since I'm buying shares out of current income, I spend the same dollar amount on them every month, give or take a few bucks. The lower the price in a given month, the more shares I get to buy. And since I'm not looking to sell any of my shares until at least 2-3 years out, the number that I most want to see growing right now is not my purely hypothetical "paper wealth" on a particular day, but my total share count. With that perspective, events like we saw unfold this week are great news. A lower purchase price means that I'm going to own that many more shares down the road, if and when the time to sell them finally arrives.

    It's especially great news when the thing that has driven the price massively lower is a short-term, herd-spooking non-event which has absolutely NO IMPACT on the company's actual future prospects. Moments like that are a buyer's paradise.

    (Of course, that was the very moment when you chose to become a seller, so you'll have to take my word on this.)

    There will be another iPhone announcement next year. I'll still be here then, and I'll be holding some extra shares because of the way everybody freaked out about the announcement this year. So no, I'm precisely the opposite of disappointed about all this.

    If GTAT's solvency depended upon them being in this year's iPhone, then I'd be worried. But it doesn't, and it never did. That was a meaningless distraction. Apple has built GTAT a factory that can produce as much sapphire in a year as the whole rest of the world combined, and GTAT is using it to produce sapphire, which they're going to sell. That's the one and only fact that ever mattered in this entire story. Whether Apple uses that sapphire in a phone, uses it in a watch, loads it all onto a giant rocket and fires it directly into the sun, or doesn't purchase any of it at all (in which case GTAT will simply sell it to other buyers, as their agreement with Apple stipulates) is utterly irrelevant, so long as GTAT gets paid.

    GTAT is the largest holding I have, by far. On paper, my net worth dropped significantly this week. But so what? It's not about this week. The company I own a piece of today is the same company I owned a piece of last week. It's a company with enormous potential that seems poised to make a great deal of money in the years to come, one which I believe will be much more valuable in the future than has been reflected in ANY share price that it's ever sold for thus far. And the piece of it I own this week is bigger than last week because some frightened short-term thinker accepted an absurdly low price for me to take his shares off his hands.

    I'd love to know which "investment philosophy" advocates selling off your investments in a panic at the precise moment when everybody else is selling off their investments in a panic, thereby guaranteeing that you will receive the lowest possible price for them and lose the maximum possible amount of money. No offense, but it doesn't sound like a very good philosophy. If one behaves and reacts like a sheep, then one's fate will probably be similar. And it's the LUCKY sheep who merely get sheared....
    Sep 11 06:26 PM | 10 Likes Like |Link to Comment
  • Corning Gorilla Glass Retains Its Dominance Over GT Advanced Technologies' Sapphire [View article]
    Well, the premium is pretty negligible at this point. :)

    I chose March because GTAT reports 4th-quarter results in February. The 4th quarter is the one that they've been saying all year long is where the vast majority of their 2014 revenues will fall -- so basically, February is the moment when the world will find out for certain whether management was serious about their revenue projections, or was just blowing smoke all this time.

    My strong impression of GTAT's management is that they don't blow smoke. So, I'm expecting a sizeable run-up in the share price in late February (assuming one doesn't come sooner than then for some other reason).

    And I don't actually need the price to hit $20 by mid-March; I just need the market at large to become convinced that that's a more likely possibility than it thinks it is today, at which point I can sell the calls for a multiple of the pittance I paid for them and let someone else worry about whether it actually comes to pass or not. That sentiment change seems reasonably do-able to me, given a six-month window for it to happen in.

    I'll still be much happier if I can get some cheap $15s to test this theory on too, though. :)
    Sep 11 05:16 AM | 1 Like Like |Link to Comment
  • GT Advanced Technologies - Short Interest Drops, But Does It Matter Now? [View article]
    People should keep in mind that while Apple owns the factory, they are leasing it to GTAT, and GTAT's contractual obligation (in exchange for the right to lease and operate the place) is simply to guarantee a specified production capacity which Apple can tap if and when it chooses to. In effect, Apple has "right of first refusal" on any sapphire that GTAT produces there. But if Apple doesn't buy any given portion of the sapphire they produce, GTAT is free to sell it elsewhere. Granted, not to some specific (and redacted) set of consumer electronics manufacturers who compete directly with Apple, but to anyone else who wants to buy it for some other purpose. And given that the global sapphire market is currently, severely constrained by available SUPPLY, not by any absence of demand, there's no good reason to think they won't sell everything they produce. In fact, Gutierrez seemed to be saying as much during one of the recent earnings calls: Roughly paraphrased, what matters is that we are producing the sapphire and we expect to sell all of it.

    The market is getting this part of the story completely wrong. It's viewing the Mesa plant entirely as "the Apple sapphire factory," and assuming that if Apple's demand for sapphire during any given time period is lower than anticipated, then the factory will just sit idle and GTAT won't make any money. That's not the case at all. GTAT will be producing (and selling) as much sapphire as they possibly can throughout the term of their lease, whether they ultimately end up selling it to Apple or to somebody else. (And given the hard-nosed way that Apple bargains over price with its suppliers, they might actually make better margins if they have to sell some of it elsewhere.)

    To those who keep asking, "Why would the Mesa plant be running 24/7 if Apple is only using sapphire for watch screens and home buttons this year?" -- that's why. Because the market GTAT is serving doesn't begin and end with Apple; it only begins with them.

    If I'm getting some crucial part of the contract wrong, then somebody please correct me, but that's my understanding of how this arrangement works.
    Sep 11 04:53 AM | 25 Likes Like |Link to Comment
  • Corning Gorilla Glass Retains Its Dominance Over GT Advanced Technologies' Sapphire [View article]

    I wouldn't count on Apple suddenly making a mid-cycle improvement to their phones. If they did that, they'd be screwing over all the early buyers (i.e., their biggest fans) who would now be stuck with the "inferior" version of that same phone. It's not the way they operate, it's not something they've ever done in the past, and it would be totally out of character (not to mention bad business) for them to do it in this case. This whole notion is nothing more than wishful thinking by those who don't want to admit that Apple has already made its decision about what this generation of iPhone screens will be made of. They have. It's done.

    However, your suggestion about the GTAT calls is an excellent one, in my opinion. (I bought a few March 2015 $20s over the past couple of days and I'm hoping to buy some $15s to go with them if the prices stay down. Play money compared with what I have in my shares, but I agree that there's an opportunity to earn a serious multiple from their current prices if things go even moderately well over the next several months.)

    I would not definitely NOT second your suggestion of selling one's real shares to buy calls, though. Especially not as a way to alleviate stress. That may be the worst stress-relief prescription I've ever heard, in fact. :)
    Sep 11 03:55 AM | 3 Likes Like |Link to Comment
  • Corning Gorilla Glass Retains Its Dominance Over GT Advanced Technologies' Sapphire [View article]
    Sorry to go off on a philosophical tangent, but I have to respond to the sentence "Still long, have to be."

    No, you don't have to be. Your future money won't care which stock you earned it in, and it especially won't care whether it was the same stock that you lost some money in previously. If you believe that some other stock has greater potential than the one you're (allegedly) "stuck" in because it just had a big drop, then put your ego aside and do the sensible thing: Sell that stock, book the loss, pay a bit less on your taxes next April as a consolation prize, and put your money in a place where it can grow again from a position of strength.

    If your only remaining reason for owning a stock is that you don't want to confirm that you made a losing investment, then you shouldn't still own it. If you wouldn't be willing to pay the amount of money you have left in it today to buy it at the price it's selling for today, then you shouldn't still own it. If that's the case, get out and put the cash into something you actually do want to own.

    Apologies if I've mischaracterized your thinking or if I'm reading too much into the phrase "have to be." For the record, I'm long GTAT because I want to be, and I intend to buy more of it later this week. I don't personally think selling it now would be a good move at all. But if the only reason someone can find for NOT selling it now is to avoid the psychological discomfort of locking in a loss, I'd think they'd be better off taking that hit as soon as possible and simply viewing it as the price of freeing themselves from a bad situation.
    Sep 11 03:19 AM | 12 Likes Like |Link to Comment