From Chris Kohler at Game|Life:

In an interview with Nikkei Shimbun, Sega managing director Hideki Okamura says the company is shifting its focus from PSP to Nintendo DS, pointing out that there is a title they will release this year that will “surprise absolutely everyone.”

And remember that point I made about competing with Nintendo on first party titles and seeing it as a challenge rather than a dead end? I think Sega’s got it (for the obvious reason that they already have some head-to-head competition with Nintendo under their belts):

We have to do a lot of thinking about titles for Nintendo’s hardware, because Nintendo’s own titles are extremely strong. It really is difficult to sell a title as a third party. What that means is that we’ve got to go after it with force: “heave-ho!”

Start with Sonic, Sega, and we’ll see where this relationship goes from there.