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Source: New Nook is Android-based, full-color

Tipster tells CNET that the new Nook, which Barnes & Noble will announce on Tuesday, October 26, will be a $249 full-color touch-screen e-reader running on Android.

This is just a crude mock-up--and not the real deal--but our source says Nook Color is coming. GeekTonic.com

Is the upcoming Nook a color e-reader? Barnes & Noble doesn't comment on rumors, but CNET has been in communication with a source who says the company will unveil a new Android-based full-color touch-screen e-reader next Tuesday, October 26.

According to the tipster, who wishes to remain anonymous but has proven reliable in the past, Barnes & Noble's new e-reader will be called the Nook Color, have a 7-inch screen, and retail for $249.

The tipster said the entire company has been focused on this product and that "it's a big step ahead, instead of chasing Amazon." While the new e-reader is Android-based, the source indicated it wouldn't have the same functionality as the iPad--but it would be half the price of Apple's entry-level tablet.

The source also said existing Nooks will continue to be sold. Barnes & Noble announced recently that it would release a major firmware update that would improve the performance of its existing Nooks, so it makes sense they'd be sticking around, particularly since the Nook would be split into a more affordable e-ink offering and a higher-end color model.

The big question, of course, is what exactly the color screen will be. Qualcomm-backed Mirasol has shown prototypes of e-readers using its special color displays, which are viewable in direct sunlight (like e-ink), yet are able to display video.

According to reports, Mirasol devices aren't due to hit the market until the first half of 2011. But it's possible that Barnes & Noble is not using a typical LCD screen and perhaps has come up with a solution that makes the device usable in direct sunlight. If so, that would be very interesting.

To be clear, we cannot confirm that our tipster's comments are accurate, but we feel comfortable enough with the source's previous statements to post this story.