There's a lot more to the strategy than short-term profit. In fact, short-term profit isn't even a goal of Microsoft or Sony when they release a console. The goal is to make money through the life-cycle of a console.
Sony's mistake was that the PS3 was too expensive to manufacture and the technology they were developing didn't pay off. I believe they underestimated two things:
(1) The progress technology would make before the PS3's release and
(2) How long it would take to release the PS3
Technology is beyond the Cell in every way right now -- video cards can do many times more more pure math than the Cell and general purpose processors are faster than the cell. The Cell is basically a PPC970 -- the same processor Apple abandoned last year to upgrade to Intel processors -- plus the SPUs which, combined, are much slower than ATi's recent GPUs at crunching floating point numbers. It's not perfectly analogous, but for games it is close enough and CPUs and GPUs should be looked at together when considering game performance.
Sony knew things would be costly at first if they released their console with a BD drive as well, but I think they underestimated how much other components would end up costing and how fast Microsoft would be able to make their console a year earlier. They're lucky MS didn't launch along side with them -- it's likely they would've switched to faster processors making the PS3 look downright old on release.
What gets me is that it must have been obvious at Sony that they weren't going to hit a 2005 release back in late 2004 or early 2005, and later they kept saying they were going to release in March '06 until March '06 arrived. Why insist on lying to the consumer like that when it will be obvious you were (games weren't even ready for the system in November '06).
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