Every day, it's becoming clearer that e-readers will be the hot holiday gifts of 2009. Amazon (AMZN) is obviously in the game with its Kindle, with which it took an early lead in the industry. Barnes & Noble (BKS) has made a play with its new Nook reader, applying some pressure to what was once a wide open space.

Even though we're still short of Black Friday, the weeding process has begun. Sony (SNE), which is also in the e-reader market, has revealed that it makes no guarantees about delivery by Christmas.

Borders (NYSE:BGP) announced on Tuesday that it will shut down nearly half of its Waldenbooks stores, start its own online bookstore (ending its affiliation with Amazon.com), possibly sell most its overseas locations, and launch a new concept store format in 2008. The company is currently at work on a prototype, but said that it would be working harder to better tailor the stores to suit local markets.

Here are some of my thoughts on their plans:

- Competing with Amazon.com probably won't work. Amazon (NASDAQ:AMZN) lost money for years before it was able to turn online book selling into a profitable business, and has a huge competitive advantage over Borders in selling books online. I can't even imagine what Borders will do to compete with Amazon, and it just doesn't seem like it will work.

- The company's efforts to revamp its stores may be more promising. The ones that I've been in aren't particularly attractive, and Borders could do far more to create a bookstore vibe. I would advise them to look around some of the small, independent bookstores that are doing well and look for ways to capture that mood. Their existing stores have a big-box feel to them, and that is always a bad thing for a bookstore. Perhaps the new look will change that and, if it does, it could save the company.

In all, I think Borders will sink or swim as a brick-and-mortar bookstore and would do well to focus its efforts there, and leave the online business to Amazon.

Long-time writer for Barron's, Jonathan Laing, takes an deep-dive on the shares of Barnes & Noble, Inc. (NYSE:BKS).

Books are dead, right? It's all about the Internet?

Maybe. But Laing thinks BN is an ideal candidate for a buyout.

Despite a nice rally in stocks, Barnes & Noble has been a laggard. Other problems: analysts are lukewarm on the stock; Amazon.com is a threat; there is slowing consumer spending; and there is also stock option backdating concerns.

However, smart money is moving into the stock, such as from the hedge fund Pershing Square. It holds about 8% of the Barnes & Noble.

Pershing's superstar investor, Bill Ackman, likes Barnes & Noble because: the aging population bodes well for books; BN has a massive superstore footprint, which provides a Starbucks-like social experience; there is little inventory risk (because books can be returned to the publisher); and the brand is very powerful.

Also, Barnes & Noble has taken steps to restructure the cost structure and boost cash flows, offering more high-margin products (such as wrapping paper), and providing self-publishing services.

And, with no debt -- as well as the strong cash flows -- Barnes & Noble would certainly make for an attractive leverage buyout from a private equity group.

Actually, there may not be any need for private equity financing. Given the company's balance sheet and the founding family's equity stake, the deal could be done completely with debt financing.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.