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Massive Sales Drop Hits GT Advanced Technologies

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After years of growing along with the solar market, GT Advanced Technologies (NASDAQOTH: GTATQ  ) is experiencing the same downturn solar has. To make matters worse, the company's huge investment in sapphire has also run into excess supply and falling prices, causing a drop in sales there, as well.

First quarter revenue dropped a whopping 84%, to $58 million, after polysilicon and sapphire sales dropped off the map. The big concern right now is that new orders accounted for just $16.6 million during the quarter, not nearly enough to keep the company's doors open. 

Net loss was $18.7 million, down from $159.4 million, but still not a strong result.

Hoping for growth
The HiCz technology that's supposed to drive the next generation of solar modules doesn't appear to be ramping as quickly as expected. The normal customers in China have terrible balance sheets, and the Chinese state-run banks that fueled purchases a few years ago are cutting back. GT is making progress in launching HiCz, but we shouldn't expect it to be a big piece of the pie in 2013.

There is some hope in the Sapphire business this year. Sapphire is expected to be about 55% of the projected $500 million to $600 million in revenue this year. Motorola Solutions (NYSE: MSI  ) announced today that it has chosen GT Crystal Systems to supply sapphire screens for a new multi-plane bioptic imager. The product will require a 24" square piece of sapphire, which will come from the Salem, Massachusetts facility. 

The cover screen market is where management sees strong growth potential, because sapphire can offer greater strength and durability than current cover glass. Like solar, this is a huge market if it takes off, but it hasn't as of yet.

Foolish bottom line
Non-GAAP guidance has the company making $0.25 to $0.45 per share in profit this year, and if it can do that and gain momentum, this stock is a great value. The problem is that revenue momentum hasn't actually taken hold yet. Until it does, I'll take a cautious approach and watch from the sidelines. There's just too much downside risk if customers keep putting off purchases, or if oversupply continues to saturate markets.

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