Can Turtles Fly?

Borders Group (BGP), the 2nd largest physical bookstore in America, is on the verge of bankruptcy ( here is a history of Borders for those interested in the industry). It's still a bit too early to put the nail into the coffin, but the odds are long that Borders can survive without concessions from bondholders or book suppliers. Borders has posted losses for 4 years straight and something like 14(?) of 16 quarters. The question is whether it will liquidate (chapter 7 bankruptcy) or restructure and re-emerge (chatper 11 bankruptcy). The path chosen is important because it has big ramifications for competitors like Barnes & Noble. I started looking at Barnes & Noble (BKS) after Geoff Gannon suggested but it looks like Geoff has sold out of his position for a negligible loss (apparently because he found better opportunities elsewhere). I, on the other hand, still find Barnes & Noble attractive. I am sticking with the notion that, suggested by Geoff a while ago, ...

If anyone ever wonders why legacy businesses often have difficulties competing against new ones, the current changes in the book industry should prove helpful. Jeffrey Trachtenberg's article in The Wall Street Journal from a few months ago, " E-Books Rewrite Bookselling ," says this about the changing landscape: E-books have turned the economics of book retailing upside down. When it launched the iPad last month, Apple championed a new approach to e-book pricing. Earlier this year, most large publishers agreed to establish a so-called agency model, where the publisher receives 70% of the digital price while e-book sellers act as agents and receive 30%. While some best sellers remain at $9.99, many major authors are priced at $12.99 or $14.99. For many digital booksellers, the new model is good news: Instead of having to pay publishers half, or $12.50, for the e-book edition of a $25 hardcover book, and then sell that book at a loss—for, say $9.99—to match Amazon...

On the first page a donkey asks a monkey, "What do you have there?" The monkey replies: "It’s a book." "How do you scroll down?" the donkey asks. "Do you blog with it?" Then he asks: "Where’s your mouse? ... Can you make characters fight? ... Can it text? ... Tweet? ... Wi-Fi? ... Can it do this? TOOT!" No, the monkey repeatedly replies. "It’s a book." —Linton Weeks, quoting from Lane Smith's It's a Book A few weeks ago, writing for GuruFocus, Geoff Gannon laid out the bullish thesis that underpinned his purchase of Barnes & Noble (BKS). For those not familiar, Barnes & Noble is the largest bricks & mortar book retailer in North America (and possibly the world?). Since this was a contrarian decision—many have given up on book retailers—and it involved a mid-cap company—I don't generally like investing in microcaps and smallcaps, which are common with many amateur value investors—it piqued my in...