The AP covered the story at the time, and they got this quote: "We did not see sales take off as we and many others had anticipated," Daniel Blackman, vice president and general manager of Barnes & Noble.com, said Tuesday. "The other factor is that consumers haven't embraced the technology. There isn't widespread adoption of an affordable and an easy to use e-book device."
Barnes & Noble won't get back into ebooks until 2009, when they end their 6-year hiatus by purchasing Fictionwise and eReader.com, and then using the tech to build the Nook Store.
Amazon, on the other hand, was selling PDF and MSReader ebooks in 2003 and they never stopped. Instead Amazon started throwing money at the technical problems and pricing problems. They bought Mobipocket in 2005 and used the tech to build the Kindle Store, which launched in 2007.