(From The Wall Street Journal. CLICK to read full story.)
Borders's finances crumbled amid declining interest in bricks-and-mortar booksellers, a broad cultural trend for which it offered no answers. The bookseller suffered a series of management gaffes, piled up unsustainable debts and failed to cultivate a meaningful presence on the Internet or in increasingly popular digital e-readers.
Its online struggles proved critical as consumers became accustomed to getting books mailed to their doorsteps or downloaded to handheld electronic devices. Among Borders's biggest missteps were decisions to transfer its Internet operations to Amazon.com Inc. about a decade ago, and a stock-buyback program coupled with overseas expansion that swelled the company's debt.
Now, Borders is preparing for a costly and time-consuming trip through bankruptcy court, where it will seek to close about a third of its 674 Borders and Waldenbooks stores, the people familiar with the matter said. Borders also would cut swathes of its 19,500 staff as it attempts to reinvent itself to compete with Amazon and its hot-selling Kindle reader, and Barnes & Noble Inc., the nation's largest bookstore chain and maker of the Nook e-reader.
Whether it can restructure and emerge as a stand-alone company is unclear. Many Wall Street bankers and lawyers who have studied the chain believe it may not be able to avoid liquidation. It is expected to report more than $1 billion in liabilities in its bankruptcy petition, said a person familiar with the matter.
Online shopping, and the advent of e-readers, with their promise of any book, any time, anywhere, and cheaper pricing, have shoppers abandoning Borders and Barnes & Nobles bookstores as they did music stores a decade ago.
"I think that there will be a 50% reduction in bricks-and-mortar shelf space for books within five years, and 90% within 10 years," says Mike Shatzkin, chief executive of Idea Logical Co., a New York consulting firm. "Book stores are going away."