Is it or isn’t it?

“It” being Borders and the question being, “Is Borders going to file for bankruptcy?”.

Following on the heels of Borders announcement Sunday that it would be delaying payments to some landlords, non-book vendors and a growing number of publishers, Bloomberg reported that the bookseller could be filing for bankruptcy as next month.  Citing three unnamed sources who are “familiar with the matter”, Bloomberg not only reported on the possibility of a bankruptcy filing, but also said Borders may close as many as 150 stores.  Needless to say, stock prices fell — again — for Borders.

When asked for a comment, Mary Davis simply referred reporters to a “statement from Borders President Michael Edwards. He said the company “is doing everything possible” to maintain its relationships with vendors and publishers. While his company has a financing commitment from General Electric Capital, Borders may proceed to an in-court restructuring, Edwards said in the statement.”

So, Borders is trying to maintain relationships with vendors and publishers — while not paying them.  I wish my creditors were as understanding as Borders seems to think its creditors will be.  But more important in the statement is Edwards’ admission that Borders may proceed to an “in-court restructuring”.  In other words, Bloomberg’s report isn’t as far out in left field as it might seem, at least if you are listening to the company line from Borders.

Here are some more facts and figures about what’s been happening.  Borders currently has 507 superstores and 169 smaller stores.  These smaller stores include Waldenbooks, Borders Express and others.  Currently, Borders employs approximately 19,500.  Since January 2010, Borders has closed more than 200 stores.  Now it is estimated that it will be forced to close at least another 150 underperforming stores in order to meet one of the many requirements placed on it by GE Capital to qualify for the restructuring loan Borders wants.  Add into this announced closure of one of its distribution centers.

During the past week, Borders stock has fallen 47% to a 52 week low of 39 cents/share.  To put this into perspective, shares traded at $3.03/share last April 12th.  Their 2010 sales dropped 14% from 2009 and Borders has posted almost $800 million in losses since 2006. (These facts and figures come from the above sources as well as The Cleveland Plain Dealer.)

The Plain Dealer article notes that iTunes severely damaged Borders’ music sales.  I don’t doubt that it did.  However, Borders could have learned a lesson then and at least limited the damage the e-book revolution caused it had it simply pulled its head out of the sand.  Instead, it didn’t look ahead.  It played the same game so many traditional publishers did.  It continued to follow a business model that was outdated years ago.

Was it inevitable that the increasing popularity of e-books would have a negative impact on traditional publishers and booksellers?  Of course, at least in the short term.  Publishers should have figured out what was happening years ago and adapted their business plans accordingly.  That includes offering booksellers way to join the digital marketplace.  That would have been a win-win situation for them both.

As for booksellers, I can understand how hard it is for the independent stores to compete against the big box bookstores and online stores like Amazon and iBooks.  To tell you the truth, there’s a part of me that is watching what’s happening to Borders with a sense of satisfaction because I remember how many local independents were run out of business when the big box bookstores came to town.  Neither Barnes & Noble nor Borders worried about what they were doing to the industry then.  But now that the shoe is on the other foot, boy are they crying “foul!”.

The other part of me hates when any bookstore is in trouble or closes.  As I’ve said before, I hope Borders finds a way to survive.  However, to do so, I honestly believe they have to have a complete change in corporate philosophy.  Without that, and without some form of accountability, the company will not survive in the short run, much less long run.


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