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According to Wikipedia, Nintendo would have been completely screwed over by the deal with Sony, giving Sony control over every single title released on the system. Also the system was going to be made by Sony, and not Nintendo, or even a joint effort from what I understand. That means that Nintendo would most likely be a software only company now, or perhaps would have had EVERYTHING stolen from them. The DS and Wii would most likely never seen the light of day. How was that a bad idea? If anything that would have killed the gaming industry, "words of wisdom". =P

Of course, Wikipedia could be wrong, but it follows along with a lot I've heard from other people.

Link: http://en.wikipedia.org/wiki/PlayStation