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Reasons this fails

1) SCE has basically been told that the rest of the company will not prop them up for much longer, and are focusing on turning a profit. That is why we are seeing PS3 games canceled and no price cut for the PS3. They could not convince the rest of Sony to give them even more money to buy a game developer that hasn't made a good game since the 64.

2) Microsoft brought out the Xbox not particularly to make a profit, but to stop Sony from becoming too strong a rival in home entertainment. They would not sell a studio to Sony for exactly the same reasons they chose hd-dvd and even now refuse to add Blu Ray support