Reuters reports that Sony is working on a cellphone/game player hybrid to better compete with Apple’s iPod Touch and iPhone.

“Sony plans to set up a project team as early as July to develop a new product that combines functions of its portable game player and Sony Ericsson’s mobile phones, the Nikkei said.”

Sony appears to be considering a number of different moves to go head-to-head with Apple’s iPod Touch and iPhone platform.

Via Mac Rumors