How Much Longer Can GameStop Corp. (GME) Survive? – Microsoft Corporation (MSFT), Electronic Arts Inc. (EA)

Of course, the fundamental problem is that the tablet, as a kind of PC, has been evolving rapidly. Since the iPad hit the shelves in 2010, tablets have made leaps and bounds in their capabilities, showing significant improvements each year.

No one was able to create a solid business based on reselling old desktop and laptop computers — consumers simply preferred to buy newer, better models — so why should GameStop Corp. (NYSE:GME) be able to do it with the tablet? It might bring in some extra revenue, but it doesn’t appear it will ever be able to replace the company’s bread and butter video game business.

Should investors short the company?
What are investors to do? Should they short the company, or just avoid the stock?

Even though Gamestop’s present fate looks to be grim, investors might want to stay away from shorting Gamestop, at least for now. Roughly one-third of Gamestop’s shares have been sold short — joining the short sellers now would likely carry heavy borrowing costs. Furthermore, that high short interest might make Gamestop susceptible to short-term short squeezes.

Video game distribution won’t go all-digital overnight. And a plethora of new consoles and new games in 2013 could make shorts feel the pain before they realize any profit. There’s also the remote chance that Gamestop’s stores could be useful to a company like Googleor Amazon that wants to break into the brick-and-mortar game industry.

At any rate, the clear trend is for the videogame market to embrace digital distribution, like music and movies before them. That doesn’t leave much room for GameStop Corp. (NYSE:GME).

The article How Much Longer Can Gamestop Survive? originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

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