Ailing books retailer Borders (BGP) hopes to ring in the new year with good news on the electronic front. The company announced on Tuesday it will launch an e-book store on its Web site, with the help of Canadian digital book company Kobo -- and that a dedicated e-reader is in the works.

Kobo is the new name (as of November) of Shortcovers, an independent spinoff of Canadian chain Indigo Books & Music (IDG) that has raised $16 million in funding from a consortium of international booksellers, including Borders and REDGroup Retail, Australia and New Zealand's leading book retailer.

"Our partnership and investment in Kobo is a significant step in our digital strategy of providing eBooks however our customers want to consume them," Borders Group C.E.O. Ron Marshall said in a statement. "Borders shares Kobo's vision to provide any e-book on any device, and we look forward to working closely with Kobo on content and distribution."

The partnership means Borders will begin selling Kobo-branded mobile apps and, as speculated in Canadian trade publication Quill & Quire and confirmed in The New York Times, is preparing to sell a Kobo-branded e-reader as well.

Third Challenger in the Market

Kobo (then Shortcovers) in November filed a trademark with the Canadian Intellectual Property Office for a wireless e-reader called Kobo. (A search of the U.S. Patent & Trademark office did not reveal a similar filing.) Kobo plans to release more than one version of the e-reader with wireless connectivity, to be sold in Borders bookstores, the Times reports.

With a Borders-branded e-reader on the horizon, the retailer is jockeying for its piece of the e-book pie dominated by Amazon's (AMZN) Kindle. But the store also plays Johnny-come-lately to rival Barnes & Noble (BKS), which just released its own e-reader, nook, to mixed reviews. Borders now sells the Sony (SNE) Reader, with no plans to discontinue that partnership.

Still, it's a long way from two years ago, when Borders showed no interest in anything digital -- outsourcing that job to Amazon. But is it too, little, too late for Borders?

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