Barnes & Noble (BKS) Plunges, Suspends Dividend as Cash Shrinks

Barnes & Noble Inc (NYSE:BKS) suspended its dividend to preserve its dwindling cash and declined to give a sales forecast for the current quarter, sending its shares down 8 percent.

Barnes & Noble, which put itself up for sale last summer, reported a lower-than-expected profit for the holiday quarter despite a sales increase as the top U.S. bookstore chain continued to invest in developing its e-books strategy, led by its Nook e-reader.

The company said it had $26.5 million in cash and cash equivalents on hand as of January 29, down from $40.2 million a year earlier.

Barnes & Noble suggested that going-out-of-business sales by rival Borders Group (OTC:BG) could pressure its results in the short term, prompting its decision not to forecast sales and profits for the current quarter.

Borders filed for Chapter 11 bankruptcy protection last week and said it would close at least 40 percent of its 500 superstores.

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Will Amazon (AMZN), Apple (AAPL), Google (GOOG) to Gain from Border's (BGP) Bankruptcy?

With Borders (NYSE:BGP) now in the midst of the bankruptcy process, the question is which companies will benefit the most from it. More than likely it'll be Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG), and to a lesser extent, Barnes and Noble (NYSE:BKS).

At issue in the short term is the closure of 200 stores by Borders, which, according to Forbes, could result in about $400 million in revenue being up for grabs. Forbes came to the number on the assumption the 200 stores being closed account for about 20 percent of overall revenue for the company.

While not exactly big numbers when taking into account the large Internet companies, over the long term it could account for some nice incremental additional sales to the retail tech majors, particularly for those focusing on magazine sales.

Amazon will obviously get the bulk of the book sales from the drop in retail stores, with Barnes and Noble picking up the majority of the rest.

Border's had generated about $2 billion in overall sales annually.

Borders (NYSE:BGP) Says Enough, Declares Bankruptcy

After fighting against the grain for years, Borders Group Inc (NYSE:BGP) has had enough, filing for bankuptcy.

The book seller said they're going to shutter almost 33 percent of the stores as part of the process.

Some believe this could be an opportunity for rival Barnes & Noble Inc (NYSE:BKS), but they face the same challenges Borders has, and while there may be a modest boost for them in some markets, overall they need to push out their digital strategy and not be distracted by this event.

Borders President Mike Edward said the company "does not have the capital resources it needs to be a viable competitor." He's referring partially to the inability to service the large debt load the company was under.

He said that's why the company had to file for Chapter 11 bankruptcy, which will allow it to restructure its debt and remain operational.

As for the store closings, the company isn't going to wait on it, as over 30 percent will be closed over the next month.

Liabilities of Borders are $1.29 billion in debt and assets valued at $1.28 billion, as of Christmas day, 2010, according to bankruptcy documents.

The major unsecured creditors of Borders according to court documents are book publishers Pearson PLC's (LSE:PSON) Penguin $41.2 million, Hachette Book Group USA $36.9 million, and CBS's (NYSE:CBS) Simon & Schuster $33.8 million,

Borders made about every mistake a company could make in being behind the trends of their particular industry. They failed to see the permanent change in how people were reading books, and made an ill-fated attempt to sell CDs and DVDs at a time when those industries was beginning to shrink as well.

Borders last trade was $0.2284.

Borders Group (NYSE:BGP) Plunges Again on Payment Delays

Borders Group, Inc. (NYSE:BGP) has again revealed its desperate plight, as they are again putting off paying not only vendors, but landlords and others they owe money to.

This isn't totally unexpected, as when GE Capital (NYSE:GE) offered a financial package to Borders, it came with strict requirements, which include preserving liquidity in order to qualify for it.

The package offered by GE Capital is $550 million, and if Borders doesn't end up qualifying for it, the next step would probably be seeking protection from its creditors through Chapter 11 bankruptcy.

If that were to happen, it would probably wipe out those holding common shares in the company.

Border closed Monday at $0.73, down $0.0089, or 14.01 percent.

Is Borders (NYSE:BGP) the New Blockbuster (OTC:BLOAQ.PK)?

That Borders Group (NYSE:BGP) is in a crisis is an understatement, and appears to be the new Blockbuster (OTC:BLOAQ.PK), although at least with Blockbuster they have some hope of fighting their way slowly back via different ways of selling their products.

With Borders, what can they do to differentiate? Who would provide them with capital with basically no road map for the future as to generate revenue and earnings?

Canaccord commented, "The second-largest U.S. bookstore chain said its loss doubled in the third quarter, and warned it could face a liquidity crisis in 2011 if it does not raise money. Borders’ loss was $74.4 million between August and October, almost twice as much as the $37.7 million it lost in the same period a year earlier. Sales excluding new store openings were said to have fallen 12.6%, with no mention of performance over the important Black Friday/Cyber Monday weekend. “Our third-quarter results reflect the business challenges facing Borders and the industry at large,” noted Chief Executive Mike Edwards. While it was “disappointed” with the results, Borders had begun to 'vigorously address these challenges,' he added. More concerning, though, Borders said its borrowing capacity was reduced during the third quarter because a third-party valuation lowered the estimated liquidation value of its inventory. The company is “taking several actions” to improve liquidity, including 'detailed discussions with potential lenders for replacement financing that we believe will provide sufficient liquidity through at least the beginning of 2012.' It is also considering the sale of certain assets and some moves to boost sales, but noted that if the steps it is taking to remedy its woes are unsuccessful, it could violate its credit agreements in the first calendar quarter next year, 'which could result in a liquidity shortfall.' The next chapter for Borders is hard to read, given that hedge fund luminary Bill Ackman recently tabled a proposal for Borders to buy larger rival Barnes & Noble (NYSE:BKS). It is unusual for a smaller company to want to buy a larger company, and particularly unusual when it has no money."

Borders closed Monday at $1.24, up $0.04, or 3.33 percent. Blockbuster soared to $0.1710, up $0.03, or 21.28 percent.