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The Borders Story: The Final Chapter?

Chapter 5: The Great Restructure

In 2006 Borders stock was trading around $20 a share when hedge fund manager William Ackman decided the stock price had significant growth potential, predicting that it could trade as high as $36. Ackman's Pershing Square Capital acquired an 11% stake in the company, establishing a relationship that would eventually keep the book seller afloat.

But the stock never reached that level, peaking around $25 in March 2006, before beginning its treacherous descent.

By 2007, faced with a sluggish book market and intense competition from Amazon and discounters like Wal-Mart (WMT) and Costco Wholesale (COST), Borders realized it needed to refocus its attention on its core superstore business.

As part of its long-term strategic plan Borders said it would remodel stores, revamp its Borders Rewards loyalty program, scale down its Waldenbooks business, debut a new proprietary e-commerce site that would end its deal with Amazon and explore strategic alternatives for its international segment (which eventually resulted in the closure of its overseas stores).

At the time CEO George Jones said: "Our company's performance has fallen short in an industry that is increasingly competitive, technology driven and price sensitive. We recognize the urgent need to go on the offensive and drive significant change."

Chapter 6: It's an E-Reader World

But even as Borders embraced change, it discounted one critical element: the emergence of the e-reader.

Amazon released its first version of the Kindle in November 2007. To give Borders credit, it did manage to quickly follow up by partnering with Sony (SNE) to sell its e-reader in stores, but it overlooked a prime opportunity to develop its own device.

At the time, Sony's e-reader was also being sold at other retailers like Best Buy (BBY), Circuit City and Target (TGT), giving Borders little clout in the e-reader space.

Once again, Borders chose the joint-venture route, teaming up with Sony to create a co-branded site to sell e-books.
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