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GameStop misses on earnings, considers acquisitions

Yahoo Finance Live anchors discuss reports that GameStop is considering acquisitions following third-quarter earnings.

Video Transcript

BRAD SMITH: Everyone switching gears here. GameStop, they missed estimates in its latest quarter, while reporting a year-over-year decrease in its cash and cash equivalents. Amid this downbeat earnings release, GameStop CEO says the company is open to exploring acquisition opportunities. There, you're taking a look at your screen of the actuals versus some of the estimates here.

And we've been watching GME shares here. But most notably here, within this earnings release, but also the call thereafter, this is a company that's not taking any more questions. The call is very quick. And they just pretty much lay out the environment that they're in right now.

BRIAN SOZZI: Right, it's a comedy of errors over at GameStop. Matt Furlong, CEO, another eight minute conference call. One minute of that entire eight minute conference call was them reading the safe harbor disclosure. Matt Furlong only spoke for about seven minutes. And I have a story right now on the Yahoo Finance home page that's really getting me dragged on Twitter. I really don't care because the bottom line analysis here on GameStop, this is a company that has now, I think, broken a lot of promises to investors.

You have sales down in pretty much all divisions. You have margins under pressure. And now you have a clear shift in tone by Furlong in his seven minute conference call, saying, we are now cutting expenses. This was a company that was supposed to be investing for future growth in new areas. That just goes completely against what him and Ryan Cohen have been pitching to investors over the past year-- a big change in tone, and I think a big red flag on this company.

JULIE HYMAN: I mean it's very confusing why the stock would be up. But I mean, I guess that's nothing new, right?

BRIAN SOZZI: It was down. It was down by 4 and 1/2 yesterday.

JULIE HYMAN: Oh, I thought I saw a green on the screen. What was I looking at?

BRIAN SOZZI: Well, it looked like pre-market is, in fact, up. So maybe the market likes--

JULIE HYMAN: Oh, but now it's down again.

BRIAN SOZZI: But maybe the market likes that they are cutting expenses. But even still, this company, hemorrhaging cash. They're now in cash conservation mode. They're out there cutting expenses, I think trying to finally make a quarter for investors. And it's not a good look, not a good look.

JULIE HYMAN: Yeah, definitely not a good look.

BRAD SMITH: On the call, they said that it's worth reiterating, our goal is to achieve profitability in the near term. How? They're already looking at some of the inventory that have. They also discussed that on the call to say how much of that they need to actually continue to work through. They said that they've strengthened their inventory position by divesting a small percentage of merchandise that was acquired.

So any time you hear a company divesting of its inventory, also trying to get back to profitability in the near term. Oh, by the way, with the backdrop of more entanglements or tie-ups in the M&A landscape that's taking place, if Microsoft and Activision Blizzard are eventually able to consummate that particular deal, that could be the nail in the coffin for a company like GameStop, in terms of the retail environment versus how people are downloading games right now, and just leveraging the cloud for that experience.

BRIAN SOZZI: Yeah, and I just mentioned some of the Twitter reaction to my story. I think one person just tweeted me who was watching this-- cash flow positive, baby. Eat it. We'll, eat this. They generated $177 million in operating cash flow in the most recent quarter. Last year, they bled or lost $293 million. It doesn't matter. This is a company whose cash position is down year over year.

This is a company still losing large sums of money in the quarter and year-to-date. This is a company really, really with no strategic vision to keep cash flow coming into its business over the next five years. So I get that they're passionate. I understand the GameStop faithful. But again, this was another terrible quarter by this company, and another embarrassing earnings total.