In a much anticipated reorganization, Finlay Enterprises is exiting its long-standing business running leased jewelry counters in department stores and will focus on the specialty jewelry store business.

The company’s specialty jewelers at press time included 69 Bailey Banks & Biddle, 34 Carlyle, and five Congress stores. It plans to reduce those numbers by 40.

The strategy shift was a major turnaround for 122-year-old Finlay, which for years ran leased jewelry departments in stores like Lord & Taylor, Macy’s, and Bon-Ton. But that business had grown difficult of late, the result of department stores’ sinking market shares and some stores’ decisions to run their departments internally. Macy’s says it will run its jewelry business internally; Lord & Taylor, whose counters were set to be run for Fortunoff, is “exploring options.”

According to Steve Silverstein, CEO of the New York office of the Israel Diamond Institute, vendors believed the only alternative to this reorganization was Chapter 11. The deal requires vendors to accept delays in payments so the company can survive until August 2009.

Prior to its reorganization, the heavily indebted company’s stock was trading at two cents.