Ken Kutaragi announces the PSP project at E3
Electronics giant Sony has surprised the gaming world by announcing plans for a portable game console.
The handheld will build on its success of the PlayStation 1 and 2 consoles that dominate the gaming world.
The move pitches it into direct competition with Gameboy maker Nintendo as well as phone maker Nokia which is also producing a gaming handset.
The console should be on sale by the end of 2004.
The new handheld will be called PSP and its imminent arrival was announced by Sony boss Ken Kutaragi at the E3 trade show currently ongoing in Los Angeles.
Details about the PSP's capabilities are scant but it is expected to have an 11cm (4.5inch) backlit, thin-film transistor liquid crystal display, memory stick slots and show DVD quality images.
The handheld is likely to be equivalent in power to the PlayStation 1 console allowing Sony to draw on a huge catalogue of already created games.
Sony is already king of the consoles and has outsold both Microsoft's Xbox and Nintendo's Gamecube.
The SP is the sleekest Gameboy yet
But it will face a fierce fight with Nintendo thanks to its decades long dominance of the handheld market with the Gameboy.
Nintendo brushed off Sony's announcement and said it would be working on tying the Gamecube console and Gameboy handheld closer together and by rolling out new versions of long standing favourites.
Despite Nintendo's confidence, Sony's announcement knocked 10% off the value of the Gameboy creators share price.
For its part Nokia said that its Ngage hybrid phone and game handheld was likely to be on sale in October. The Ngage is likely to go on sale for $299 (£185).
Nokia has signed a deal with Sega to provide games for the handset hybrid.
In other E3 news Sony said that from June the adapter that allows gamers to play against others online would be bundled in with the PlayStation 2.
Phone firms are making handheld game consoles too
Sony is also to trim 10% off the cost of a PlayStation 2 in the US, bringing the price down to $179.
Sony has also signed an exclusive deal with gaming giant EA on the software maker's sports titles.
The deal means that online versions of popular titles, such as Madden NFL, will only be created for the PlayStation console.
The move is widely seen as a snub for Sony rival Microsoft which is keen to dominate online play.
In the past EA has balked at creating online versions of its games for Microsoft's Xbox because of the cash terms of such a deal. EA is also thought to be wary of ceding control of key customers to Microsoft and its Xbox service.
Sony has also announced an exclusive deal with game maker Take Two for a follow-up to the best-selling GTA - Vice City.