GameStop Unveils Technology Institute - Analyst Blog

Video game retailer GameStop Corp. GME unveiled its new business division focused on delivering superior technological solutions to better serve the changing needs of today's customers. The business division named as GameStop Technology Institute ("GTI") will be associated with leading technology behemoths and academic institutions to obtain better assistance on innovation as well as research and development.

IBM Corporation IBM and Center for Retailing Studies at Texas A&M University's Mays Business School are the co-founding partners of GTI. The collaboration with Center for Retailing Studies, an eminent retail education center, will provide GameStop access to extensive research on retail as well as consumer behavior.

IBM, on the other hand, will provide its expertise to the entertainment software company on cloud development and design. GameStop will utilize IBM's cloud development platform, BlueMix, to create new cloud and mobile applications (apps). These new apps will make customers aware of GameStop's latest products available both in stores and online.

As per management, the incorporation of GTI is an attempt to push beyond the existing boundaries of GameStop to address the changing needs and preferences of consumers and compete with online giants more effectively.

Notably, with rising online competition in the video game industry, brick and mortar retailers are being compelled to upgrade services to match their e-Commerce counterparts.

GameStop announced its latest move just before the slated release of fourth-quarter fiscal 2013 earnings results (Mar 27, 2014). In January, the company had lowered its earnings outlook as demand for Microsoft Corp.'s MSFT Xbox 360 and Sony Corp.'s SNE PlayStation 3 software was soft during the holiday period. This resulted in a 22.5% decline in the videogame retailer's new software category sales, dragging the stock 20% in a single day.

Our proven model also does not conclusively show GameStop as likely to beat the Zacks Consensus Estimate this quarter. This is because GameStop carries a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. For a stock to outperform, it needs both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3.

Notably, GameStop has delivered an average beat of 48% in the last 4 quarters.