GameStop sells mobile business for $700M

Dive Brief:

GameStop announced last week it's selling its Spring Mobile division and the 1,289 retail stores it operates as an AT&T wireless services dealer for $700 million to Prime Communications, another AT&T dealer that has 600 of its own store, according to a GameStop press release.
The move comes several months after the gaming retailer confirmed it was exploring a possible transaction of some kind in a review of its strategic options. GameStop plans to use proceeds from the Spring Mobile sale to "reduce the company's outstanding debt, fund share repurchases, reinvest in core video game and collectibles businesses to drive growth, or some combination of these options," the company said.
GameStop acquired Spring Mobile in 2013 and made it the core of its Technology Brands group, which also includes Simply Mac, a chain of stores that sells Apple products.The Simply Mac operations are not included in the Spring Mobile sale, according to the Dallas Morning News.

Dive Insight:

When GameStop mentioned a "possible transaction" several months ago, some suggested the entire company could be sold. In any case GameStop appears to be winding down its Technology Brands business, or at least most of it. This is the unit that the retailer built to help it diversify from its core games business at a time when many video games were evolving from physical to digital products.

The retailer put considerable effort and money into pursuing this diversification strategy, eventually making other acquisitions to add to Spring Mobile's retail footprint, growing the business from fewer than 100 stores in 2013 to almost 1,300 today. Along the way, it acquired Simply Mac, and struck a deal to sell Cricket Wireless products and service out of its GameStop locations.

But, within the last year or so, GameStop may have been feeling as much pressure in its sanctuary business as it did in its video games business back in 2013. Consumers' mobile smartphone replacement cycles have been growing much longer, intensifying competition in an already crowded market that requires a lot of marketing investment. The compensation terms of Spring Mobile's dealer agreement with AT&T also reportedly changed, and not in a good way.

As a result GameStop is selling Spring Mobile, and already reportedly ended its arrangement with Cricket Wireless.

It's worth noting that sales of gaming hardware had been rising earlier this year, and the collectibles business reportedly is healthy too, so GameStop's re-focus on its core may prove fortuitous — at least in the short term.