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Jeff Kagan: Will GameStop Transform in Time?

GameStop is navigating a very volatile industry environment...
Equities columnist Jeff Kagan is a telecom, technology and wireless analyst and consultant. He covers 5G, AI, IoT, the metaverse, autonomous driving, healthcare, telehealth, pay TV and more. Follow him at JeffKagan.com and on Twitter @jeffkagan and LinkedIn.
Equities columnist Jeff Kagan is a telecom, technology and wireless analyst and consultant. He covers 5G, AI, IoT, the metaverse, autonomous driving, healthcare, telehealth, pay TV and more. Follow him at JeffKagan.com and on Twitter @jeffkagan and LinkedIn.

Every successful growth curve rises, crests then falls. The challenge for every company is to create the next growth wave before the first declines. Only some companies move from wave to wave and remain healthy for years. That’s where GameStop (GME) is now. They were a hot growth company, but over the last few years, their core marketplace has been changing. Let’s take a look at how they are changing and if they are creating their next growth wave.

Some companies create the next growth wave. Apple (AAPL) is a good example. Each product was a major move into a new industry or category. Each rides its own growth wave. Some are longer, others are shorter. Some higher and others lower. The MacBook, iPod, iPhone, iPad, Apple TV and more show that Apple understands the value of creating the next growth wave.

Apple, Google, IBM, Motorola, Nokia, Blackberry Growth Wave

Google Android, like Apple iPhone was a new growth wave. However, like Apple, Google (GOOG) is not successful in every area they compete in. They are with the Android smartphone which is the operating system on other handsets like Samsung Galaxy. However, they have also tried, less successfully with their own handset Nexus and Pixel and their own wireless service as an MVNO reseller called Google Project Fi.

Both Apple and Google have transformed the wireless space. They are now the top two players. They won the lead from Nokia (NOK) and Blackberry (BBRY) who are still trying to figure out what happened to them. However, they are not successful in every area of wireless.

Think back, and you will remember Motorola (MSI) was a leader until they lost that position to Nokia and Blackberry in the late 1990’s. Then Nokia and Blackberry lost their leadership position to Apple and Google over the last decade. Marketplace leadership changes and often passes from company to company over time.

IBM has been around forever and we’ve seen it move from growth wave to growth wave over time. Waves like the Selectric typewriting, the ThinkPad computer and now Watson. Companies can last forever, if they do a great job of creating the next growth wave. However, only a few actually accomplish this goal.

AT&T, Verizon, CenturyLink, Comcast, Charter Growth Wave

Companies like AT&T (T), Verizon (VZ) and CenturyLink (CTL) started out in the same business, but today are completely different. A decade ago, SBC acquired AT&T, BellSouth and Cingular and became a powerhouse in the wireless and telecom space, moving from the smallest to the largest competitor over the course of just a few short years.

Now, AT&T is rapidly growing and expanding into new areas like DirecTV, wireless TV or mobile TV, AI, IoT, the cloud and much more. They are helping other industries like automotive, healthcare, retail, smart cities and more to reinvent themselves for the future.

Verizon has been trying to reinvent itself as well, but it taking a different path, acquiring AOL and Yahoo and using their wireless and wireline technology to become a marketing company. This does not seem to make as much sense at this early stage, but we’ll have to see how they progress over the next few years.

CenturyLink is the third baby bell, and they are still mostly in the same business as always… local phone service. They are expanding into Wi-Fi, broadband and other areas, but they are not taking the same path as either AT&T or Verizon.

Comcast (CMCSA) and Charter (CHTR) still lead the cable TV space, but the marketplace is shifting away from cable TV to IPTV and wireless TV. That is putting extreme pressure on these companies as they try and come up with a competitive answer.

Technologies also must weather the same change wave storm. Smartphones like iPhone and Android are successful. Google smartphones and wireless service are not. What about the cloud, AI, IoT, VR and more. Will they all be successful? Maybe. Maybe not. VR is having some trouble to date. And what is coming next?

So, as you can see, industries change, technologies change and companies focus must change. Some change and continue to lead. Others don’t change as quickly and struggle. Many fail.

The GameStop Transformation Opportunity and Threat

This is the same opportunity and threat GameStop is facing today. That’s why they must create their next growth wave. They are transforming into new business segments with growth potential. So far, they are successfully creating some new growth waves. Will they be substantial enough to matter long term? That’s the question many are asking.

I cannot predict whether they will be successful or not going forward. No one can. However, I can say they are making some aggressive moves and they have the potential to come out stronger than before. The rest is in their hands.

Companies always try and make this transition and create the next growth wave before their current wave shrinks. Only some are successful. We have seen many companies struggle over time. Some end up changing and starting their next growth wave. Others just continue to struggle.

In fact, I remember when Apple struggled during the late 1980’s and early 1990’s. They were in trouble. Starting with Steve Jobs it grew, but then reached a point where they thought they needed a steady hand of a CEO, not an entrepreneur. That’s when they hired John Sculley. That lasted a few years, but the company didn’t recover and in the 1990’s it looked like Apple was in real trouble.

Apple Had Similar Issues to GameStop in the 1990’s

Then they brought Jobs back, created the iPod and they were off to the races once again. Ever since they started this next growth wave, Apple has been growing. Some years stronger than others, but the growth wave is still going on over there. And Apple in fact is one of the most powerful global leaders of all time.

The conclusion is, even when companies look like they are in trouble, they can recover and can lead going forward. So, what can we expect from GameStop? That’s the question. I don’t know the answer… we’ll have to watch them. Their successful transformation is not guaranteed, but they understand the challenge and have a solid plan if they can execute on it.

That’s the GameStop challenge. That’s the secret to success for any company. Continued growth. Continued change. New growth waves. GameStop does see the writing on the wall. They do see their industry is changing. They do see how they need to grow and expand and become something new and different going forward.

They are making moves in several different directions. The only question now is whether these moves will be successful? That’s the question I will be following and writing about going forward. So far, I think while they do face challenges, they are still on track.

Jeff Kagan is an Equities.com columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, speaker and consultant. He follows wireless, wire line, telecom, Internet, cable TV, IPTV, Cloud, Mobile Pay, FinTech and communications technology. Email him at [email protected]. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan


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