Borders Group Inc. (BGP) will cut prices on two of its electronic-book readers by about $20 on Wednesday, as the struggling bookstore chain tries to gain a foothold for its fledgling e-book initiative amid fierce competition.

Its Kobo reader, powered by Canada's Kobo Inc., in which Borders has an equity stake, will drop to $129.99 from $149.99 and its Aluratek Libre reader will go to $99.99 from $119.99 apiece. The devices aim to compete with more popular, and more expensive, offerings like Amazon.com Inc.'s (AMZN) Kindle, Barnes & Noble Inc.'s (BKS) Nook and the Apple Inc. (AAPL) iPad, and follow price cuts on the Nook and Kindle earlier this summer.

Borders has struggled with eroding sales and a flagging share price while paring down debt to levels it hopes will allow it to survive in the poor economy against better-positioned rivals. It will release fiscal-second-quarter earnings Wednesday morning, and investors will look to see if it's suffering similar store-traffic declines as Barnes & Noble, itself dealing with a proxy contest involving investor Ron Burkle's Yucaipa Cos. while it explores options to inject value into its slumping stock.

When Borders announced its branded e-book store in early July, it set the ambitious goal of 17% market share in a year's time. Barnes & Noble said last Tuesday it had already captured over 17% of the market, giving it better market share in e-books than it has in physical books.

Borders President Mike Edwards said in an interview that it's too early to tell what level of market penetration Borders has, given the newness of the business, but he said the price cuts don't "have anything to do with pricing in the marketplace." Borders knows achieving its market-share goal is "entirely contingent on selling devices," Edwards said, and it wanted to make sure it had an offering priced below $100 to attract customers.

Edwards declined to discuss specifics of Borders' results before Wednesday's news release and subsequent conference call, but said major investor Bennett LeBow won't be speaking on the call. The reclusive LeBow is chairman of Liggett tobacco owner Vector Group Ltd. (VGR) and is now chairman and chief executive of Borders. He made a $25 million investment in Borders group this year that could see him invest another nearly $79 million to amass a 35% equity stake.

In addition to 11.1 million Borders common shares, LeBow received warrants to buy 35.1 shares at $2.25 apiece, more than double the $1.11 that Borders fetched in light and unchanged Tuesday trading. Edwards said Borders has modeled LeBow converting his warrants into its financial plans, but said any delay in conversion isn't material to its operations compared to its issues with managing inventory, coping with a large debt load and dealing with underperforming stores.

-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171; maxwell.murphy@dowjones.com
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