GameStop shares surge 44% on tie-up with Microsoft to upgrade stores

Adds details from release, analyst comment, background

Oct 8 (Reuters)GameStop Corp GME.N and Microsoft Corp MSFT.O signed a multi-year deal that would allow the videogame retailer to upgrade its stores with the software maker’s cloud and hardware services, sending GameStop shares 44% higher on Thursday.

GameStop, which already sells Microsoft’s flagship Xbox gaming console, said it would now offer a two-year digital subscription package with the consoles to players at no upfront cost.

Several analysts are expecting the November launches of the XBox Series X and rival Sony’s PlayStation 5 to boost sales for GameStop, which has been reeling under losses driven by coronavirus-led disruptions and delayed console purchases ahead of the new cycle.

Brokerage Jefferies said the agreement provides GameStop access to revenue created at the gamer level, instead of solely on the piece of content sold.

GameStop, which did not disclose the financial terms of the deal, said it planned to roll out Microsoft’s 365 services and workplace messaging app Teams in its stores and equip store associates with new Surface devices.

Gamestop’s shares closed up 44% and were 5% higher in extended trading. The company said it would move its back-end and in-store operations to Microsoft’s Dynamics 365 platform, which is a set of cloud-based business applications and customer data platform.

Last month, Ryan Cohen, the biggest individual investor in GameStop and founder of e-commerce firm Chewy, raised his stake in the company to nearly 10%, saying he was willing to become more involved to produce the best results for shareholders.

(Reporting by Ayanti Bera in Bengaluru; Editing by Devika Syamnath)

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