STOCKHOLM, Sweden and TOKYO, Japan - Alarmed by the success of iPhone in the mobile handset market as well as its recent emergence in the mobile gaming segment, Sony is mauling plans to bring phone like features to its highly succesful gaming device, Sony PSP.

With iPhone 3GS offering the one of the best mobile processors (600MHz CPU and 256MB of RAM) and a dedicated graphics chip in the form of PowerVR SGX that supports OpenGL ES 2.0; iPhone support is on the list of every major game developer today.

Sony Ericsson has reported a 47% drop in profit within the first quarter of this year, and has been pro-active with several launches in the past few months. Having launched a gaming mobile handset - Yari - to a lukewarm response last week, the tech giant is now considering merging its PSP lineup with its mobile handsets.

Sony Ericsson filed a patent back in 2006, with a concept of revolving screens to bring PSP-like double hand grip while gaming and a single handed grip for normal phone functions.

While Sony Ericsson seem to have thought this concept in 2006, when mobile gaming was beginning to make waves on handhelds and the first generation iPhone was yet to be released, the concept never materialised into a commercial model. However, the mobile gaming and handset scenario are much different now, with Apple's iPhone ruling the smartphone segment and game developers being lured to the iPhone, to target a much wider customer base.

Sony's PSP and Nintendo's DS have been doing brisk business in the mobile gaming market; the competition from smarthphones is beginning to hurt both Nintendo and Sony. Sony is now reported to be reconsidering its PSP phone initiative, as reported by a Nikkei business daily. Reuters have reported that Sony may set up a project team as early as July to work on a project to make  PSP-phone a reality. With a PSP phone, Sony can attempt to beat its  competitors Nintendo  in gaming, Apple in smartphone segment, and Nokia's Ngage in handset gaming segment.

Whether Sony will be able to come up with a feasible model in its attempt to seize the market initiative from iPhone in mobile gaming segment remains to be seen. As seen from previous Sony Ericsson models, which relied heavily on Sony brandings of Walkman and Cybershot to market Sony Ericsson's handsets, whether PSP will also go Sony Ericsson way or it will remain solely with Sony is something only time can tell.