Borders Dumps Amazon As Distributor: Bad News for Both?

Borders' (BGP) decision to end its distribution deal with Amazon (AMZN) is probably bad for both parties. Estimates vary, but analyst Mark Mahaney at Citigroup thinks that Borders accounts for 2-3% of Amazon sales, which is not gigantic, but is clearly a material loss for Amazon.

Borders, on the other hand, must now create and drive traffic to a retail website where it would hope to make all the sales it made via Amazon, plus enough extra to justify the cost and disruption of the transition.

Given the difficult quarter that Borders just finished -- it announced Thursday morning that it lost $73.6-million in the fourth quarter, versus a profit of $119.1-million a year ago -- that is asking a lot.