Okay, it hasn’t happened yet but odds are Borders Books will be delisted from the NYSE early in 2009. The criteria for being delisted is generally a stock that has an average closing price less than $1 per share for 30 consecutive days.

Borders Group Inc. (BGP) fell below the $1 per share mark on December 2, 2008 and hasn’t even sniffed the $1 mark since. As of the writing of this post Borders Group Inc. is sitting at $0.38.

Getting delisted doesn’t mean the company’s shares can’t still be traded on other exchanges or that it will automatically go bankrupt. But delisting certainly doesn’t make things easier and is a clear signal of a company in distress.

I expect to see an announcement of a delisting notice issued to Borders in January. Coupled with potentially poor 4th quarter results and the future of Borders Books is certainly murky. More and more people, including Borders employees, will be asking: ‘Is Borders going out of business?‘

Earlier this year I’d asked ‘Is Borders going out of business?‘ At that time Borders was also looking for a buyer, essentially a white knight to come riding in on a purple unicorn with a long flowing rainbow mane.

Things haven’t gone well since and Borders 3rd quarter results contained the following bit of information under the heading ‘Strategic Alternative Update’.

Management provided an update to its previously disclosed strategic alternatives process, which included the exploration of a wide range of options, among them the sale of the company and/or certain divisions, including Paperchase Products Ltd. With respect to the sale of the company, management is no longer contemplating a transaction.

Now lets be clear about what this really means. No one wanted to buy Borders Books.

Not Barnes & Noble, not Amazon, not some European bookseller, nobody wanted Borders. I mean, when the big win for your quarter is debt reduction you know things aren’t rosy.

Debt, including the prior-year debt of discontinued operations, was reduced from a year ago by 34.2% or $273.1 million at the end of the third quarter to $525.4 million. This compares to debt of $798.5 million at the end of the third quarter last year.

The stock is now down 97% in the last year and sits today at approximately $0.35 a share.

The news that Amazon would be acquiring Abebooks caused quite a stir in the book industry. Very quickly, most of the major players went on the record with a reaction to the announcement. Anirvan Chatterjee, Founder and CEO of Bookfinder, did a great job of compiling the reaction and also had his own take on the news.

As a long-time industry-watcher, I think this is pretty big news, certainly the most significant acquisition in the online used/rare book space to date—and yet not a lot may change.

Chatterjee went on to speak about his own experiences.

When AbeBooks acquired BookFinder.com, there was some concern from well-wishers that they’d shut us down or make us skew our results—but neither happened, or was even an option. We’re still a small independently-managed operation, but now with more resources to draw upon.

Tim Spalding, Founder and President of LibraryThing, congratulated Amazon on the “shrewd acquisition” but also reassured users that things would not change.

LibraryThing remains LibraryThing. We will continue to uphold and advance LibraryThing values, including open data, strict privacy rules and support for libraries and independent bookstores.

In a subsequent dialog with users Spalding addressed the seemingly conflicting investments Amazon now has in LibraryThing and Shelfari.

I just wish it were closer to April fools. We could blog the launch of Libraryfari. (Don’t worry, that particular turn of events would happen over my dead body.)

Brian Elliott, CEO of Alibris (and my former boss), was more focused on what Alibris could continue to provide to both consumers and booksellers.

While ABE and Amazon are busy integrating and explaining why sellers should still pay fees to both of them, we’ll be busy helping drive more sales volume to our sellers.

Elliott laid out a three pronged strategy that included improvements to seller storefronts, advancements in collectibles and continuing to leverage business partnerships. The latter is a true asset. Many seem to forget that Alibris helps power Barnes & Noble, Borders, Books-A-Million, Chapters/Indigo and Blackwell U.K. That’s the #1, #2 and #3 brick-and-mortar book retailer in the U.S., the #1 brick-and-mortar retailer in Canada and a leading U.K. retailer.

Brendan Sherar, CEO of Biblio, was less diplomatic in an interview with Bookpatrol.

I believe it is unhealthy for the overall market, because it further removes competition and choices for collectors, readers, and booksellers alike. In a free market economy, that is generally accepted to be a bad thing. When competition and choice are reduced or eliminated, markets inevitably move towards lower standards for product quality and service for all concerned, as well as unrestricted pricing strategies which ultimately hurt the customers – in this case, booksellers and bookbuyers.

Sherar went on to indicate that booksellers are, in general, a very independent bunch (to which I concur) and that any consolidation that may occur would likely create opportunities for “emergent and disruptive businesses”.

Luke Lozier of Bibliopolis provided a great response via email about a week after the initial announcement. I could excerpt parts of Luke’s response but I believe you’ll be better served by reading it in its entirety.

Let’s be fair. It’s not a good policy to stick your thumb in the eye of the 900 pound gorilla that sits (anywhere it pleases) in your industry. That’s not to say that any of the above weren’t being honest. But perhaps some tempered their reaction and were being a bit diplomatic. Not an entirely bad business practice.

What will happen?

It seems clear to me that Amazon will leave Abebooks as an independent entity. The Canadian government will have a lot to say about any workforce consolidation or reductions. Yet, you’d think that Amazon would, at some point down the road, seek to create some operating efficiencies.

The idea that Amazon will do to Abebooks what it did to Bibliofind is not going to happen. Boris Wertz points to ShopBop.com and Anirvan, in a quick email exchange with yours truly, also used Endless as positive examples.

Integration of inventory between the two sites seems difficult, both from a technical perspective but also, as mentioned by Elliott, from a business perspective. If you’re integrating inventory, why exactly would a seller continue to pay fees to both sites? And fees are important, VERY important.

All of the above was written in the week after the initial August announcement. I kept wanting to crank out a blog post but … I’ve had a number of balls in the air and the farther away we got from the event, the less important it seemed.

So fast forward to the present. What’s happened? Not much. At least not yet.

And what about the chatter among sellers between then and now? Well … distraction in the form of politics took the magnifying glass off this major event.

Change. It applies to politics and books.

Even when the final acquisition was announced on December 1st the reaction was muted.

In fact, a completely unscientific perusal of messages and reactions leads me to believe that a majority of sellers may actually welcome the change. Here’s one such missive culled from the web.

Amazon makes me mad and there were times they’ve almost amde [sic] me feel like crying … but… by golly they provide a site that make sales. With them I feel if they make money they leave some for me to make to [sic]. ABE made me think of vampires … they’d drain customers and listers.

As I’ve noted (here, here and here), the book industry isn’t doing particularly well. Large corporations can weather the economic downturn through staff reductions and other cost saving measures. But individual sellers don’t often have that luxury. Perhaps they’ve got part-time help, but for the most part these are solo operations.

Sales make all the difference and pragmatism may override any sentimental feelings for the “old” Abebooks of Rick Pura and Cathy Waters. Even those who rage against the homogenization of the industry may temper that ire if it comes with a steady stream of orders.

It will be interesting to see what 2009 brings and I’ll post some thoughts and predictions in a future post.

A week after the August announcement that Amazon would buy Abebooks I asked Luke Lozier, Principal & Co-Founder of Bibliopolis for his reaction to the news. What I received was well beyond my expectations, a personal reflection brimming with humor, intelligence and insight. I have posted the entire email as received below for your reading pleasure.

On Monday a bookseller asked me, “So where were you when Amazon bought Abe?”

Perhaps that will become a classic question now. I told her that I first heard that Amazon would acquire Abebooks while driving to L.A. on Interstate 5. I received a text message from one of my partners. I couldn’t stop the car to surf the blogs looking for reactions. I couldn’t check my e-mail to see who had already sent me missives. I was the designated driver on an old school road trip and I was already three hours in, so I had a few hours to think about things without any input from booksellers or colleagues. This was a good thing I think. It gave me some distance from the event, both figuratively and literally.

My first thought was probably a common one, that Abebooks would be gone within a year. And Bookfinder. And Fillz. And Chrislands. LibraryThing? Maybe not. LibraryThing is cool. But I decided that there was not enough air in the room for more than one bookselling brand at Amazon.com. It would take some time, but even though the best parts of Abebooks might survive in some way, they would be unrecognizable.

Now that a week has passed, I’ve completely lost confidence in that prediction. After I had a chance to reflect and to absorb input from others (and there has been a lot of input) I’m not so sure my initial instincts were correct.

Amazon.com is named for a river, and rivers can have both tributaries and distributaries. According to Wikipedia, “A distributary is a stream that branches off and flows away from a main stream channel. In some cases, a minor distributary can “steal” so much water from the main channel that it can become the main route.”

What if Abe becomes such a distributary? Is it possible that Amazon will channel used and rare book sales toward Abe instead of the other way around? Slowly at first, but eventually, after some transformation of Abe’s technology, en masse? The headlines in business papers suggested that Amazon was getting back to its roots as a bookseller. What better way than to devote a site to books? A novel approach!

Am I just considering this option because that is where the river metaphor flows? Perhaps. But Abe’s biggest need, if it is to grow, is more eyeballs. Amazon has those eyeballs. Amazon hasn’t absorbed every entity that it has purchased, so Abebooks clearly has a chance. The only thing we know, is that we have no idea what is going to happen. If we don’t consider all of the possibilities, there is a good chance we won’t consider the right one. Also, Abe said they would stick around in their press release. I’ll take them at their word for now.

Much of the reportage about this story remains stuck in a familiar paradigm: suggesting that the landscape of online bookselling is solely occupied by “marketplace” aggregators. In this case Abe and Amazon. Other options are available to booksellers such as dedicated e-commerce websites and speciality portals (by region, by speciality). Our firm, Bibliopolis, has achieved great success for hundreds of booksellers by providing such services (in concert, of course, with “marketplace” selling). These models leverage the Internet as a tool to maintain a bookseller’s identity, independence, and professionalism. Mergers like this one demonstrate precisely why that is so important. In the end, the booksellers will make the market, whateveral it turns out to be.

Sometimes timing is everything.

Amazon’s acquisition of Abebooks was completed as of December 1st for a reported $100 million.

I have to think this would have been a far lower number had the deal been initiated in the current economic environment. Books aren’t exactly a bulletproof commodity in uncertain times. For instance, lets take a look at Barnes & Noble’s third quarter results (emphasis is mine).

For the thirty-nine weeks ended November 1, 2008, the company had a net loss of $5.2 million as compared to net income of $20.8 million in the prior year.  The net loss includes the third quarter charge noted above as well as a $5.0 million after-tax charge from the first quarter relating to a tax settlement.  Excluding these charges, the company achieved net income of $6.8 million year-to-date.

“A significant drop off in customer traffic and consumer spending impacted our business in the third quarter,” said Steve Riggio, chief executive officer of Barnes & Noble, Inc.  “In a challenging environment with a comparable store sales decline of 4.6% this year, the company has aggressively managed expenses to operate profitably.  Furthermore, the company is taking measures to reduce expenses for the balance of this year and next.”

I’ve also charted some of the troubles of Borders Books, the number two US bookseller. And things haven’t gotten better since I last checked in. Despite management’s attempt to put a silver lining on the numbers, Borders Books third quarter results are ugly (emphasis if mine).

On an operating basis, the consolidated loss from continuing operations for the third quarter was essentially flat with the same period a year ago at $39.0 million or $0.64 per share, compared to $38.4 million or $0.65 per share in the third quarter of 2007.

But how about sales?

Borders Group achieved third quarter consolidated sales of $682.1 million, a decrease of 10.0% over 2007.

Certainly the new Borders.com is doing well, right?

Sales through Borders.com in the third quarter totaled $11.9 million, which is below management expectations due to the challenging sales environment. As a result, Borders Group does not expect Borders.com to break even this year as previously stated.

Amazon isn’t faring that bad with third quarter results that show a 31% increase in sales and 48% increase in net income. But look closely and you’ll see that the outlook for books might not be so rosy.

Worldwide Media sales grew 19% to $2.49 billion, compared with $2.09 billion in third quarter 2007.

19% isn’t the same as 31%, that’s for sure! If you dig a bit deeper, the North America sales growth was just 15% and I’d bet dollars to donuts that the books portion of ‘Media’ was a laggard in this group.

Given the weakness in books and a projected economic doldrums, did Amazon overpay for Abebooks?