Borders Group, the bookstore chain criticized by some for being late to enter the digital books and readers market, has teamed up with fledgling Kobo Inc to set up an online store for mobile devices by 2010's second quarter.

Loss-making Borders, which has been losing readers to larger rival Barnes & Noble Inc, plans to integrate a new online store with its own website, Borders.com, it said in a statement on Tuesday.

Kobo, a spinoff of Indigo Books & Music Inc that now provides books to customers in over 200 countries, will also host a separate e-book store that caters to multiple mobile devices from the Apple Inc iPhone and Palm Inc Pre to Research in Motion Ltd's Blackberry and cell phones running on Google Inc's Android operating system.

The company's shares rose 1.6 percent to $1.25 in extended trading from a close of $1.23. Investors pushed the stock lower in past weeks, worried the U.S. bookseller was missing out on the burgeoning electronic reader market, especially during the crucial holiday season.

Unlike Barnes & Noble with its Nook, Borders does not have its own e-reader, preferring to sell Sony Corp's devices in its stores. While the company says it wants to remain device agnostic, some analysts have criticized the bookseller for not laying out clear plans to expand its footprint in the rapidly expanding market.

Both chains are said to be bleeding market share in traditional bookselling to online retailer Amazon.com Inc, whose Kindle e-reader helped spur the current wave of similar devices and online book stores catering to mobile devices.

(Reporting by Edwin Chan; editing by Andre Grenon)

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