Sony is working on a smartphone that leverages the company's entertainment assets, such as the PlayStation Portable. The device would combine other features of the smartphone genre with the addition of being able to download and play PSP games, according to The Wall Street Journal.

The newspaper also said that the Japanese electronics giant is working on another device that competes in the more-than-a-netbook-but-less-than-a-laptop market, a device that sounds like it could be trying to compete with Apple's iPad.

Sony is working to both combat the success of Apple's iPhone platform, and to develop new smartphone-related revenues in the face of sagging sales from the Sony-Ericsson joint venture with Ericsson. To do so, the company is wanting to finally bring to market an iTunes competitor that can actually compete with Apple's online powerhouse, and build a smartphone as part of the ecosystem.

That iTunes competitor is named Sony Online Service -- note that its acronym is SOS -- though that is only a temporary name being used internally before it launches. The service came to light in late 2009, and is scheduled to launch in 2010.

Sony has had great success with the PlayStation Portable product line, but Apple has gained substantial market share in handheld gaming with the iPhone and sales of games through its App Store. Sony CEO Howard Stringer hopes to bring customers back to his company's brand by bringing to market devices that interact with SOS, which is similar to the model that Apple used first with the iPod, then the iPhone, and now the iPad.