Sony Computer Entertainment is poised to announce deals with software companies and internet service providers to try to reverse the dismal performance of its PlayStation Portable handheld games machines.

SCE is expected to reveal a package of PSP online services in mid-March, with analysts expecting the tie-ups to involve at least one big ISP, such as Yahoo.

The move is part of efforts by Sony to shore up its games division, which is suffering worse-than-expected losses from its PlayStation 3 console.

Nobuyuki Oneda, Sony’s chief financial officer, told the Financial Times that restoring the games division to break-even was crucial to achieving the promise of Sir Howard Stringer, chairman, of group margins of 5 per cent by the end of this financial year.

Analysts expect the PSP business tie-ups to promote the PSP as a more user-friendly device capable of downloading films, television shows and back-catalogue PlayStation and PlayStation 2 games. The changes could allow users to download games and other content anywhere the PSP can be connected to a WiFi network. Although the PSP is already technically capable of downloading and storing online content, such as games, the services have not appealed to mainstream users. A tie-up with a well-known internet brand or television company, said one Nomura analyst, could change that.

Mr Oneda acknowledged that the PSP’s recent performance had been a cause for concern, with software sales a particular disappointment. “It was pretty much a competition issue with the Nintendo so we have to fight back by introducing more attractive applications [for the PSP] by using the network,” he said. 

Mr Oneda’s comments come as PSP shipments have fallen far behind those of the Nintendo DS, which was launched in December 2004, the same month as the PSP, and has achieved strong growth among non-traditional gamers. To date, the PSP has shipped 24m units globally, against worldwide DS sales of 35m.

Sony’s new plan is part of its changing approach to consumer electronics. Mr Oneda said that, in future, the company would offer “no single product to lead consumer electronics” but instead would concentrate on developing networked devices and creating networks in the home. “The trend is towards high definition and internet connectivity. Those are what we will shoot for in the future.”

Mr Oneda explained the importance of pulling the games division back into the black. If it could break even and the film and finance businesses retained their present margins, the improving conditions of the electronics business and its 70 per cent contribution to group-wide margin levels would be enough to meet the March 2008 target of 5 per cent margins, he said.

“I have some confidence we can achieve this,” he said.