Terrible. Still, I have hope that Sony will survive this, albiet a changed company. Leaner, meaner, more focused.
As for PS4, I certainly don't see a PS3 type upgrade. Never have. I expect the PS brand will be spread across all Sony devices (Smart TVs, cell phones, computers, tablets, etc.) with Gaikai and some software upgrade for PS3 to compete with WiiU/720. There might be a modest hardware upgrade, but considering the WiiU is only slightly more powerful, that's not even needed.
The good thing about being in third this gen is they are no where's close to saturating the market with PS3 so they could continue with it but continually try to broaden it's appeal.