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Al De Leon, right, and unidentified man play Sony PSP games during the first day the Consumer Electronics Show in Las Vegas on Monday, Jan. 8, 2007.JAE C. HONG/The Associated Press

Sony Corp. is set to launch a head-on challenge to Nintendo Co Ltd. and Apple Inc. with a new handheld game device that analysts widely expect to be unveiled at an event in Tokyo on Thursday.

The consumer electronics giant has declined to comment on the agenda for the event, which comes the same day Nintendo is expected to report a slide in quarterly profit. Nintendo next month launches its 3D version of its popular DS model.

With smartphones and tablets eating into the market for portable gaming devices, Sony and Nintendo desperately need a blockbuster product to boost sales and profit.

Nintendo's DS sold nearly 136 million units up to last September. Sony's PSP has sold some 61 million.

Sony's new offering will include a touch panel and 3G wireless connectivity, the first in a portable games device, Japan's Nikkei business daily said this week. It added the 3G set-up would be for data, not calls.

Blog reports say the device will be as powerful as the PlayStation 3 home console.

"What's important from our point of view is how many they can sell," said Mizuho Investors Securities analyst Nobuo Kurahashi. "A lot depends on the software titles they offer."

He noted an apparent change of emphasis among games companies. "The Nintendo 3DS seems to be shifting into the area of serious games that cannot be played on a smartphone."

The next-generation PSP may be closely related to a PlayStation phone that may be in the works.

If not announced this week, the PlayStation phone could be unveiled on Feb. 13 at a Sony Ericsson event in Barcelona.

Nintendo is expected to report a near-40 per cent drop in profits for October-December as sales of its DS and compatible software fade ahead of the 3D launch.

Sony is next week expected to post a profit fall for the October-December quarter, hit by its struggling TV business.