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Amazon, Borders team up
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April 11, 2001: 12:32 p.m. ET
Booksellers form co-branded Web site to peddle books, movies, music
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NEW YORK (CNNfn) - Amazon.com Inc. and Borders Group Inc. made their Internet book-selling partnership official Wednesday, announcing plans to re-launch Borders.com as an Amazon partner.
The companies did not disclose the financial terms of the deal, which is similar to one Amazon (AMZN: up $0.82 to $12.83, Research, Estimates) struck last year with Toysrus.com.
Under the terms of their agreement, Amazon will handle inventory, shipment, site content and customer service while Borders (BGP: down $0.59 to $16.39, Research, Estimates) will leverage its brand name to drive sales.
The co-branded site is scheduled for an August launch and will feature books, music, videos and DVDs from Ann Arbor, Mich.-based Borders, which will continue to operate its brick-and-mortar stores, the companies said.
The site also will offer content unique to Borders, such as store location information and in-store event calendars.
In turn, Amazon, based in Seattle, is expected to receive promotional benefits at Borders stores.
"While our customers' needs are met online by the people who do it better than anyone else, we will provide them with what we do best – the books, music and movies they love to explore in an engaging shopping atmosphere," Borders CEO Greg Josefowicz said.
Amazon and Borders said the agreement won't have any impact on previously issued financial guidance for either company.
"Although the deal is a psychological boost for Amazon, it does nothing to address the key strategic issues the company faces: namely, a lack of growth in its profitable boom, music and video segment, and a lack of profitability in its fast-growing consumer electronics business," Prudential Securities analyst Mark Rowen said Wednesday.
Rowen added, however, that the deal stands as an acknowledgement that Amazon, which originated as an Internet bookseller and expanded into a range of other product areas, dominates the online book market.
Although Amazon has yet to turn an operating profit for its whole business, the company's book business has been profitable for several quarters.
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For its part, Borders has been struggling with its online book business. Last month, the company said its fourth-quarter profit fell 48 percent. At that time, executives said they expect losses from the Internet business to narrow to about 15 cents per share for the 12 months to January 2002, reaching $1.38-to-$1.40 a share.
Although neither Borders nor Amazon changed its financial guidance following the deal, Borders Chief Executive Greg Josefowicz told reporters at a news conference in New York Wednesday that it will likely contribute to the company's previously announced 20 percent earnings growth guidance which it gave earlier this year.
Josefowicz also said the company would cut 70 jobs at Borders.com as a result of the deal with Amazon.com. More than 100 people had been working at Borders' online operations prior to the layoffs, the company said
Both companies said they will consider adding a feature to the co-branded site that would allow customers to reserve a title online and purchase and pick it up at a Borders store.
-- Reuters contributed to this report. 
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