Rumors about a redesigned PSP handheld have been floating around for months as pressure builds on Sony to produce a compelling Nintendo DSi and iPhone/iPod touch rival. While the company has been mum about any sort of successor, denying such a device is even on their plans, Pocket Gamer says it has received inside confirmation that a new version is indeed coming before the end of the year.

Echoing previous descriptions, a developer who's allegedly working with the new hardware claims Sony's next-gen portable gaming console will have larger screen that slides and doubles as a touch screen along with dual-analog thumbsticks. According to the source, Sony is also considering to drop the UMD optical format entirely in favor of digital-only content through the PlayStation Store.

We should note that none of this is officially confirmed, but Pocket Gamer claims the new PSP will be announced in June at E3 so we should find out soon enough. Either way, it looks like Sony will be facing some pretty serious competition in this segment from both Apple and Nintendo. (Note: The image above is just a fan made mockup, not the actual product)