Since we have a creditable source for this rumor, let's do a little speculating. We know that B&N probably won't partner with WH Smiths; they are already selling ebooks and ebook readers for Kobo. So that leaves (according to Wikipedia) Waterstones, Foyles, and Blackwells. The latter 2 aren't large national chains in the UK (not like we would understand it in the US), so they are probably too small for Barnes & Noble.
So that leaves Waterstones, and I'm not so sure that they're looking to partner with B&N. I'm told that they were already looking elsewhere for their ereader. My data is a little old, but shortly after they announced that they were going to have their own ereader (which I am affectionately calling the Wookie) I heard that Waterstones had put the device out for bid.
When they put it out for bid, it means that they were inviting hardware developers to submit devices for Waterstones to consider. If chosen, Waterstones would pay a fee to put the Waterstones brand on a given ebook reader. In the gadget world this is more common than not, and even Amazon does it (that's where the Kindle Fire came from).
If Waterstones was looking for other device suppliers way back then, it means they probably weren't thinking about working with B&N. These things take time, even just to negotiate much less organize the distribution. So if Waterstones is out, then what's left? The only thing I can think of are the major retail chains. I'm not that familiar with them, so I will leave my UK readers to speculate on which will be the partner.
To be honest, I still think it's Waterstones. Yes, I did just get through proving that it's not them, but Theresa Horner was pretty damn specific about having a bookseller as a UK partner. That far outweighs any behind the scenes rumors I may have heard.
But if Waterstones reveals that they're not using the Nook, I bet you $10 that I can identify who supplied the hardware.
via The Bookseller
image by clkao