The Japanese electronics and entertainment conglomerate launched its first Walkman three decades ago, dominating the portable music player market, but it has been running far behind the iPod and iPhone in recent years.

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 Ericsson is a cellphone joint venture between Sony and Sweden's Ericsson.