Buzz Builds for Sony Game Phone

TOKYO—The head of Sony Ericsson Mobile Communications AB indicated that the mobile-phone maker might be working with parent company Sony Corp. on a smartphone with a slide-out controller to play videogames.

Sony Ericsson Chief Executive Bert Nordberg said he is aware of speculation that the company is at work on a smartphone that would take advantage of Sony's experience in developing the PlayStation Portable videogame device.

"There's a lot of smoke, and I tell you there must be a fire somewhere," Mr. Nordberg said during an interview. "Sony has an extremely strong offering in the gaming market, and that's very interesting."

While many have already started to call the expected device a Sony PlayStation phone, the handset is likely to carry Sony Ericsson's Xper ia brand, another person familiar with the matter said. The handset is also likely to run on Google Inc.'s Android operating system, and the videogames might be available through an application, the person said.

Sony Ericsson, a 50-50 joint venture between Sony and L.M. Ericsson Telephone Co., has tapped the Japanese conglomerate's consumer-electronics expertise in the past, but it has steered clear of the PlayStation gaming platform, in part because of Sony's concern that it might dilute the successful PlayStation brand.

However, the popularity of simple games available on smartphones is now a serious threat to dedicated portable gaming devices such as Sony's PlayStation Portable. The current generation of smartphones with touch screens isn't "optimized for games," said Mr. Nordberg, who took over as CEO in October 2009.

Asked why Sony Ericsson hasn't already released a phone employing Sony's gaming resources, Mr. Nordberg said: "I haven't dug into that history, but the future might be brighter."

Mr. Nordberg, who said he wants to make a lot of "noise" with a new product at the Mobile Word Congress in Barcelona in February, said there is no technological difficulty in launching a gaming-oriented phone. The main challenge, he said, is that the company has to consult many lawyers to negotiate rights issues with game publishers. "I'm very glad that we work with a company like Sony, who actually knows how to do it," he added.

After several fiscal quarters of net losses, Sony Ericsson became profitable earlier this year, thanks to a restructuring and successful releases of Android-based smartphones.

Mr. Nordberg said analysts have been too focused on sales-volume declines in the July-September period. Sony Ericsson could easily increase sales volume by offering more inexpensive phones, but profitability is more important, he said. "We do no phones under €50 ($68.43), because we won't make money," he added.

Since the spring release of its first Android-based smartphone, Mr. Nordberg said, the company has built a strong position quite quickly in that segment. He said he expects Android to remain the dominant smartphone platform in Sony Ericsson's lineup for at least the next two years.

To gain an edge in an increasingly crowded market for Android-based smartphones, the company will have to diversify its lineup. "Sony is of course a very strong brand, and why shouldn't we use that?" Mr. Nordberg asked. "Gaming, including content, is a very interesting proposition."

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