Sony wants to convert its PlayStation Portable into a mobile phone and take on Apple's iPhone.

The dark satanic rumour mill says that the electronics giant is looking into making a combination gadget that would meld its PSP gaming system with the cell phones made by Sony Ericsson. According to the Nikkei business daily Sony is pulling together a team as early as July to begin development of the new gadget.

It is the second time that such a rumour has become the “word on the streets”. In 2007, Sony filed a patent that appeared to show a PSP-like device with phone capabilities, and British Telecom said it was working with the company to bring voice and video chat to the PSP.

It will not be the next thing that Sony releases. The PSP Go, will be the next thing to grace shop shelves. It was unveiled at the E3 gaming conference, is smaller than its predecessors and has a slide-up screen.

It will go on sale in North America on October 1 for $249.