shares soared more than 40% Thursday after the videogame retailer announced an agreement to standardize its business on
cloud-based enterprise software applications. Just why this is such a big win for the stock is a little perplexing.
GameStop (ticker: GME) will run its back-end and in-store systems on Dynamics 365, Microsoft’s cloud-based business applications and customer-data platform. The company said the system will give store associates the ability to access data about “customer preferences and purchasing history, real time information on product availability, subscriptions, pricing, and promotions.”
Also, the company said store staff will use Microsoft Surface devices to “transform the in-store experience and help unlock new retail experiences in the future. “
GameStop also said it will roll out Microsoft 365 and Microsoft Teams to more than 30,000 store associates.
The company added that it has expanded its Xbox product offerings to include Xbox All Access, which provides players with an Xbox console and 24 months of Xbox Game Pass Ultimate with no upfront cost. According to the announcement, both GameStop and Microsoft will ”benefit from the customer acquisition and lifetime revenue value of each gamer brought into the Xbox ecosystem,” although specific terms were not announced.
The agreement comes just weeks ahead of the Nov. 10 launch of Xbox Series X|S, the latest version of the Microsoft (MSFT) game console.
It’s not entirely obvious why standardizing on Microsoft’s cloud applications should be driving the stock so dramatically higher, but the company has clearly telegraphed that this is a big deal. The stock was briefly halted for news ahead of the announcement.
Asked about the announcement and the sharp rally, Wedbush analyst Michael Pachter said “the market reaction is likely a short squeeze…there is little potential for a big revenue stream from GameStop from this.”
GameStop shares closed up 44% at $13.49 and continued to rise in after-hours trading,
Write to Eric J. Savitz at firstname.lastname@example.org