According to this CNN.com article, Sony has announced a portable version of the Playstation, called the PSone. It's approximately one third the size of a regular Playstation, and can download games and other data by connecting to a mobile phone. Sony said they will probably begin phasing out the "regular" Playstation in favor of the new model.
The article seems to miss the point, as they quote analysts who say the PSone won't compete with the Gameboy Color. Gee, considering that the PSone requires external power and doesn't come with any kind of a display, does anybody seriously think it's supposed to compete with the Gameboy Color?
This looks to me like a simple money-saving move. Smaller box means less material and less expensive engineering, which in turn means a more financially attractive package for Sony. The fact that they made it small enough to be called portable is happy coincidence; it's still just a Playstation. Sure, there's that mobile connectivity thing, but I doubt it's going to see much developer support in Japan, let alone in the U.S. I gotta hand it to Sony, though; that's a tiny little box to be squeezing a Playstation into.
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