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Borders CEO Resigns, Stock Falls

April 21, 1999

DETROIT (AP) _ Borders Group Inc.’s chief executive resigned from the nation’s No. 2 bookstore chain on Wednesday, departing as the company struggles to keep pace with rivals Barnes & Noble and Amazon.com.

Borders also announced a shakeup in its top ranks, naming new presidents to head its mall-based Waldenbooks chain and its online business.

The Ann Arbor, Mich.-based company’s stock fell $2.50, or nearly 15 percent, to $14.56 1/4 on the New York Stock Exchange on the news. The stock was also under pressure amid concerns that the bookstore chain’s first-quarter profits may fall shy of Wall Street analysts’ estimates.

After just five months on the job, Philip M. Pfeffer resigned as CEO and as a director at the company. Robert DiRomualdo, Borders current chairman and former CEO, will take the titles of president and CEO for now.

The company declined to comment on why Pfeffer, who was president and chief operating officer of Random House until 1996, was leaving. DiRomualdo said the company would begin a national search for a replacement.

While Borders earned $92 million last year on sales of $2.3 billion, it has struggled to keep up with brick-and-mortar rival Barnes & Noble and Internet giant Amazon.com.

Pfeffer told The Ann Arbor News in January that Borders’ annual earnings were less than they should have been because stores weren’t performing as well as they should.

``I do not believe that we delivered to our customers a compelling indication that they should shop in Borders stores,″ Pfeffer said. ``We were not as focused as we should be in selling in our stores and marketing our programs.″

Analyst Dave Ricci of William Blair & Co. said the company also had trouble meeting sales targets.

On Wednesday, Borders said its retail stores would post a profit of 4 to 5 cents per share for the quarter, while Borders.com would lose 5 to 6 cents per share. The company also said Pfeffer’s departure would cost 4 cents per share.

Analysts said that they had anticipated slightly stronger growth at the retail stores.

Other management changes announced Wednesday include the appointment of Kathy Winkelhaus to president of Borders Group Stores, a new position. Ronald Staffieri has been named to replace Ms. Winkelhaus as president of Waldenbooks.

Cedric Vanzura has been named President of Borders Online. He previously served as senior vice president of electronic commerce and fulfillment services.

A company spokesman said those moves were unrelated to Pfeffer’s resignation.

Borders was founded in 1971 in Ann Arbor as a used book store. It now owns 250 Borders superstores and 900 Waldenbooks stores.

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