Sony's next-gen PlayStation portable handheld console will be on shop shelves in time for Christmas, according to a new report.

An "insider source", said to be "a developer working on the new hardware", has told PocketGamer that the new gaming gadget will "be far more similar to the iPhone than the current device".

The source says the PSP 2 will be a compact device with a large touchscreen that will slide open to reveal buttons, D-pads and dual analogue controls.

This dual format will mean Sony can go after the casual gaming market with the touchscreen side of things, a market the iPhone and iPod touch have done very well in, while more "serious" gamers are still taken care of.

More details are said to be due to be unveiled at the E3 gaming event in June - we will keep you posted.