Will Barnes & Noble buy Borders?

Here's another indication that the two-per-channel theory may overstate the number of survivors in each channel -- Borders is considering putting itself up for sale, and Barnes & Noble might be interested in buying:

Borders said it earned $84.7 million for its fourth quarter, down slightly from $87.7 million in the period a year ago. It is also pursuing “strategic alternatives,” a phrase that often includes a potential sale of parts or all of a company. [...]

Wall Street has speculated for more than a year that Borders might sell itself to its larger rival, Barnes & Noble. A combination of the biggest and second-biggest booksellers has long been believed to be an invitation for regulatory scrutiny.

But some analysts point to the clearance given other mergers, like that of Whole Foods Market and Wild Oats Markets, the two largest sellers of organic foods, as a possible sign that a Borders-Barnes & Noble tie-up would pass muster.

On a conference call Thursday, Barnes & Noble’s chief operating officer, Mitchell S. Klipper, said his company had not been approached by Borders. But he added: “We’d certainly take a good look at the company and put it under review.”

B&N is also facing decreased earnings, though. Bookstores can't match the inventory of Amazon, and they can't match the prices on best sellers offered by mass merchants. This is reminiscent of the squeeze that has been destroying department stores slowly for the past several decades -- specialty retailers in the mall have deeper selections in each category, while discounters have better prices on high volume basic stock. As for the bookstores' other big category, music, the less said the better (Borders' CD sales were down 14.2% last year).