The Blizzard of Oz Hits Borders

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Sometimes a retreat can be part of a happy ending.

Shares of Borders Group (NYSE: BGP) traded as much as 12% higher this morning, after the bookseller announced that it would sell its 30 superstores in Australia, Singapore, and New Zealand to the area's leading book retailer.

The deal is worth at least $90 million, giving Borders a few more greenbacks to pay down its debt. Perhaps more importantly, it will allow the company to focus more on problems closer to home.

Borders announced layoffs earlier this week, slashing 20% of its corporate workforce. It's also coming off a bloody quarter and the challenging relaunch of its Borders.com storefront. That's certainly a lot going on for a company that also seems to be attached to Barnes & Noble (NYSE: BKS) buyout buzz.

Saying goodbye to the Australasian market, where Borders was never going to be more than a fringe player, is a blessing. The possibility of pocketing as much as $104 million if performance incentives are met is just icing on the cake.

Borders isn't going away, but times have changed in the bookselling industry. Borders and Barnes & Noble are no longer devouring mom-and-pop shops, as they did through the 1990s. The two companies collectively command just a third of the book market today.

Online discounters like Amazon.com (Nasdaq: AMZN) and Overstock.com (Nasdaq: OSTK) are now chiseling away at the big-box bookstores' market share. Superstore chains will also eventually worry about e-book readers like Amazon's Kindle and Sony's (NYSE: SNE) Reader, since digital delivery has little need for an old-school intermediary.

Instead of paying down its debt, Borders should earmark those funds to dream up a Kindle killer while Amazon's reader is still vulnerable in the crib. Absent that, bookselling superstores will only continue to fade in relevance. If Borders doesn't evolve, losing a foothold in Oz will be the least of its worries.