This rumor is most impressive, especially coming from Sony. When they first tried to enter the Android market with the Xperia X10, they had a huge delay in releasing the phone, and it didn't even have the best hardware for the time they were planning to launch it. So it came out with very old hardware, and also very old software( Android 1.6). Then it took a long time before it got upgraded to Android 2.1 as well.
Since then things have improved considerable for Sony's smartphone division. Their hardware is almost up to par, and they are very serious about software upgrades right now. They are the ones contributing the most back to the Android Open Source Project, and Android developers say this is actually helping them get the upgrades out there faster, because as the more of their code lies within the AOSP, the easier it is for them to upgrade all their devices later on.
Hardware wise, I say they are still a little behind so far, but not that much. Their designs are not too bad. Some actually look good. They've started making thin phones just like everyone else. They're also using a 720p display in their Xperia S and a 12 MP camera that is currently the best mobile camera on the market.
The only downside, which is I think is an important one, because it's the one that shows the most if they are able to compete with the best of the best manufacturers in the Android market, is that they used a dual core 1.5 Ghz S3 processor, which is kind of on par with the Galaxy S2 processor from last year, and at time when everyone else was introducing dual core 1.5 Ghz S4 processors and Tegra 3 quad core processors in their devices.
I was hoping the year 2012 is the year when Sony finally catches up with companies like Samsung, HTC and Motorola, and although they started the year a little slow with Xperia S, I think they have a chance to do it by the end of the year with this rumored flagship Sony LT29i (hopefully just a codename). If this phone has all that it promises, and it's launched this summer or early fall, it could really impressive everyone:
- S4 Pro chip (Adreno 320 GPU, could be either dual core or quad core CPU)
- 13 MP camera - as I said, their camera is already the best, and this could be even better
- HDR video with best-in-class low-light performance
- 2200 mAh battery in 7mm body
- 4.55-inch HD Reality Display (1280x720)
- Android 4 with software buttons
If Sony delivers with this device, I might be looking forward to a 2013 Nexus device made by them, with best-in-class hardware. They've certainly waited long enough for their turn on making a Nexus phone.