SONY PLANS PSP PHONE

Embattled Sony is making a move to reverse extremely disappointing sales of its PSP game system.

The electronics giant has filed for a patent to add a cellphone to the next generation of PSPs.

It also inked a deal with U.K. carrier BT Mobile to bring advanced multimedia, such as video chat and messaging, to the PSP.

Both moves to upgrade the underperformimg PSP come as rival Apple readies to drop its much-anticipated iPhone June 29.

"With this patent, Sony is definitely looking for the next stage," says Paul Jackson, Forrester Research principal analyst.

As it should. Sony Ericsson, its mobile-communications arm, is one of its few thriving departments. It shipped 21.8 million phones Q1 2007, compared with 13.3 million in Q1 '06.

The iPhone is a direct threat to the Sony Ericsson Walkman, the jewel of its phone franchise. Apple is expected to sell 10 million iPhones in its first year.

Meanwhile, Sony Computer Entertainment is trying to recover from disappointing sales and a stagnant PSP user base. The PSP has sold a paltry 25 million compared with the 40 million-selling Nintendo DS.

Equally bleak is the PlayStation 3 home console, which has sold 3.6 million units vs. the Nintendo Wii's 7.4 million. Microsoft's XBox 360, which arrived a year before its rivals, has sold 11 million units.

Analysts have expected the PSP to be updated almost since its initial release in March 2005. However, Sony will probably need more than a super phone to stay afloat in this category.

"The Sony Ericsson Walkman is very good," said Jackson. "The Bravia TV line is doing excellent sales. But the PlayStation 3 has been a disaster. If you wrap the phone with good games and, by next year, have three or four good initiatives, Sony may turn around."