Gaming retailer GameStop Corp. (GME, Financial) has announced a new strategic partnership with software giant Microsoft Corp. (MSFT, Financial) that has led to a significant bump in share prices. Over the last two years, share prices for GameStop have been in constant decline and settled under $10 in 2020.
Upon news of the new partnership, the stock jumped to $13.99 on Oct. 8. As of Oct. 9, share prices had reached $12.99 with a market cap of $861.44 million. The recent jump marks the first time share prices have breached $10 since the second quarter of 2019.
Under the new agreement, GameStop will gain access to the full suite of back-end and in-store solutions under the Dynamics 365 moniker. The company will overhaul its existing systems with Microsoft's cloud-based business applications and customer data platform. This will allow GameStop to actively monitor everything from customer purchasing history to product availability in real time across over 5,000 stores worldwide.
As well, the company will be employing Surface tablets and Microsoft 365 within stores as a modernization strategy that will help to level up customer service turnaround.
For GameStop, the partnership comes at an ideal time. The gaming industry has been increasingly shifting to a direct-to-consumer model where the games themselves are accessed through direct download. For retailers, profits are taken right out from under them as customers no longer require physical copies purchased in store. GameStop in particular has watched cash flows dwindle over the past four years.
Through the new partnership, GameStop will sell access to the new Xbox All Access initiative from Microsoft. The new subscription service gives customers access to an Xbox console and Xbox Games Pass Ultimate for a monthly rate. Customers will no longer be required to shoulder the big upfront cost to obtain a console. Both GameStop and Microsoft will get a cut of the profits and benefit from new customers.
Disclaimer: Author owns no stocks mentioned.
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