According to DailyGamesNews, Macquarie Research believe that Sony will reveal a new UMD-less PSP model, an upgraded version of the PSP Slim.
"We expect Sony to announce an improved PSP including a sliding touch screen with only download games offering (no UMD disc) as well as expanded PSN offering. We don't think this will be well received, but we are worried the pricing might be well above the existing model's US$199 price point. No price cut for PS3 is expected, but we think it likely the slimmer model is announced at the same current price of US$399 and with a price cut of US$100 closer to the holiday season."
Sony has gone on record on a number of occasions to deny the rumour that an upgraded PSP is in development. E3 kicks off on June 2.