Updated with Amazon response and comments from Gartner analyst Allen Weiner.

SEATTLE ( TheStreet) -- Hot on the heels of Apple's ( AAPL) iPad launch and Google's ( GOOG) 'gPad' plans, Amazon ( AMZN) may be inching closer to a color and touchscreen version of its Kindle e-reader, if rumors of its acquisition of startup TouchCo are proved correct.

With the next generation of tablet computers doubling as e-readers, consumers will now be able to view books and magazines in color, something lacking on Amazon's popular Kindle.

The Kindle also lacks touchscreen capabilities, a feature available on the latest color version of Barnes & Noble's ( BKS) Nook. Amazon, however, could be about to change that.

On Wednesday The New York Times reported that Amazon acquired New York-based Touchco, a company specializing in a touchscreen technology. Citing a person briefed on the deal, the newspaper said that Amazon will merge Touchco's technology and staff into its Kindle hardware division.

The Times reports that Touchco's technology uses resistors that have been designed to work well with full-color LCD screens.

Born out of New York University's Media Research Lab, Touchco's sensors are said to use less power than traditional touchscreen sensors and are also less expensive to produce, according to the company's LinkedIn profile.

"We don't comment on rumors and speculation," was Amazon's response to a request for comment on this story, and TheStreet was unable to reach Touchco. A note on the startup's Website says that as of January 2010, the company is no longer doing business, adding fuel to the rumor that it is now part of Amazon.

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