This is terrible news for Sony, as while the Gamecube may be considered a failure due to it's 3rd place finish, it was still a success profit wise for Nintendo, in fact, it was very profitable.
Sony's practise has always been to sell the console at a loss and recoup money from game sales. The PS3 is being sold at a very large loss comparitively, and with slow sales growth, that denies any potential profit from being realized. Worse, the longer the PS3 remains in 3rd, the fewer games it will get from 3rd parties putting it into a GC like spiral of 'no sales without games, no games without sales.'
Sony doesn't need to start selling meaningful numbers sometime in '08, it needs them now. I really do hope the 40gb sells well this Christmas, as Sony cannot afford to finish 3rd with thier business model.