GameStop's Multi-Year Deal With Microsoft Drives Stock

Zacks Equity Research
·4 min read

With a vision to become the ultimate destination for video game products, expand reach and connection to the global gamer community and leverage operational efficiencies throughout its omni-channel platform, GameStop Corp. GME entered into a multi-year strategic partnership with Microsoft Corporation MSFT. The deal will not only allow GameStop to rev up its retail technology infrastructure but will also facilitate in boosting its physical and digital video game offerings.

Markedly, the news sent the shares of the video game retailer skyrocketing 44.1% during the trading session on Oct 8. We note that shares of this Zacks Rank #3 (Hold) company have more than doubled so far this year compared with the industry’s rally of 10.4%.

In this regard, GameStop’s CEO, George Sherman, said, “This is an exciting day at GameStop as we announce the advancement of an important partnership that capitalizes on the power of our operating platform and significant market share in gaming to accelerate our digital transformation; drive incremental revenue streams; and over time, further monetize the digital world of gaming.”

Few Aspects of the Partnership

In order to provide customers with enhanced digital solutions, GameStop will utilize Microsoft’s cloud solutions and hardware products to upgrade its business operations.

The Grapevine, TX-based company will adopt Microsoft's cloud-based business applications and customer data platform, Dynamics 365, to augment its back-end and in-store solutions. With this, store associates will have a complete insight into customers’ choice and buying history as well as updated information on the availability of products, subscriptions, pricing and promotions. This will help generate a personalized in-store customer experience.

Moreover, GameStop’s store associates will be empowered with Microsoft Surface devicesthat will allow them to better interact with customers and effectively meet their demands. Management informed that Microsoft Surface devices have already been a key part of the digital modernization strategy for store management.

Additionally, the company informed that the rollout of Microsoft 365, a line of subscription services and Microsoft Teams, a chat-based collaboration platformwill equip GameStop’s more than 30,000 store employees with enhanced productivity and collaboration tools.

Undoubtedly, GameStop with its vast network of retail outlets of more than 5,000 and world-class e-commerce platform has been delivering enhanced gaming experience to customers. The company has expanded its Xbox family of product offerings to include Xbox All Access, which provides an Xbox console and 24 months of Xbox Game Pass Ultimate to players with no upfront cost. Notably, both GameStop and Microsoft will gain from the customer acquisition.

Phil Spencer, Microsoft, Executive Vice President of Gaming, said, “For many years GameStop has been a strong go-to-market partner for our gaming products, and we are excited about continuing and evolving that relationship for the launch of the Xbox Series X|S. GameStop’s extensive store base, focus on digital transformation in an omni-channel environment and expert gamer associates remain an important part of our gaming ecosystem, and we’re pleased to elevate our partnership.”

Wrapping Up

GameStop has been focusing on augmenting store experience, expanding and redesigning PowerUp Rewards loyalty program, enhancing digital capabilities and improving engagement with vendors and partners. Apart from these, the company is on track with technology upgrades for consoles and other products. The company has been gaining from continued rise in e-commerce. Notably, the company’s e-commerce sales skyrocketed 800% during second-quarter fiscal 2020. This followed an increase of 519% in the first quarter. Certainly, the company is on track to augment technology and data analytics capabilities, and boost presence in the gaming industry and widen customer reach.    

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