Why did Sony do it?

Well for the architecture of the PS3, remember they laid down their path in 2002 when pretty much every major architecture was single threaded and they thought that the Cell style architecture was an answer to two issues which are/were coming up for future computers. They saw that the forward rendering GPU architectures were going to run up against a bandwidth wall, and that single threaded architecures were going the way of the dinosaur.

The problem they have is that in hindsight pretty much every completely new architecture thats been released has failed. They failed to get developer support for their programming model and other more standard architectures quite simply outpaced the level of investment they could produce in support of their own architecture. The itanium architecure is failing, larrabee has been cancelled and the standard X86/GPU architectures with their massive investment soldier on and left their Cell in the dust. So whilst the Cell processor is a failure, it did make sense when it was first proposed in 2002 and it probably was a pretty good guess, its just simply wide of the mark.

The other problem was that GPUs have not hit the bandwidth wall as fast as was predicted. The Cell would have been a very good architecture if it wasn't for the continued bandwidth scaling of the forward rendering GPU architectures. The wall is coming, the physical limit for a copper pin is 10Gbps theoretically and the fastest GDDR5 can achieve 7Gbps IIRC. However that wall is pretty close at hand as once the compute levels in GPUs double again the maximum throughput that can be achieved through a GDDR5 interface is something like 200GB per second on a 256bit bus (guesstimate) which is only about 1/3rd more than the RV870 can manage.

The problem with their playstation business is that they were never called out on their mistakes last generation so they happily repeated them. The PS2 architecture was not the best architecture released last generation for performance per $$$ or performance per mm^2, that crown actually went to the Gamecube which used the POWER architecture which was cheaper, faster and easier to develop for than the PS2. This generation the crown for best performance per $$$ went to Microsoft with their Xbox 360 general purpose architecture which was both straight forward and high performance.

Wow, your post is very good. Im not too sure about saying that the cell is a failure considering that the PS3 will sell a lot and that there will be a lot of japanese developer exclusive in the next couple of years. But the rest of it is very well written ;).

@NEORAF - The power of SONY'S BRAND NAME is diminishing further every day.

http://economictimes.indiatimes.com/news/international-business/Sony-slides-to-4-mth-low-plan-fails-to-inspire/articleshow/5250110.cms

The company pioneered the mobile music market 30 years ago with its Walkman and once ruled the global television industry in the era of box TVs, but it is now struggling to keep pace with nimbler South Korean rivals and innovative U.S. IT companies.

"What we're seeing is a weakening of Sony's brand power. That's especially clear in North America where its market share has fallen sharply. The situation is so bad it almost makes me want to cover my eyes," said Chibagin Asset Management's advisor Fujio Ando.

"They no longer have products that are unique and can control the market," he said.

 I think what he was referring to, was if Sony had gone with a more standard x86/64 or Power architecture, their Bill of Materials could have been lower, and Dev buy-in and mastery could have been alot quicker, costs overall could have been lower including at retail sooner... and maybe instead of losing 4Billion thus far they might have only lost 1 or 2... or possibly already broke even. Cell is a success as far as being a quality chip, just in hindsight it is not hard to conjecture that they might have been better off with a more typical, lower cost platform.

 Imagine if PS3 had been 50$ cheaper per unit to make, games had come more quickly, and they had both more and higher quality multiplatforms that were only on xbox/PC. It is not that Cell is a bad tech.

Ok yes with that point of view it could be consider a failure.

Why is Sony not doing so well? It was timing. I truly believed that the PS3 needed another year of developement to drive cost of the bluray and cell and other components down. I don't think the games they had available at launch was what they really intended then the games trickled out just over the next year. I think MS had caught them with their release of the 360 and Sony had to react ASAP.

I also believed that Sony felt HD was the future with the upcoming HDTV switchover and they wanted to be there to capitalize. Unfortunately, they over estimated the demand for the switch over and the strength of their brand name plus combined with recent decline in the economy, they got caught doubling down at the wrong time.

That being said, I've owned Sony products over the years and they've never let me down. Although one trinitron TV needed repair about 8 years back. I'd much rather prefer a Sony laptop with it's bloatware over a crappy Toshiba laptop. As for Samsung TV, while the picture and features are nice, the user interface is terrible and slow.

While some of you don't think Sony innovates or are on the cutting edge, they do take risks and I applaud them for that.

Edit:  That being said, I'm glad they're making recent headway in the market.

@boneyboy, You're backing up the point that sony is losing market share. But you are trying to relate this to them not being cutting edge. Stop trying to sound like a smart ass. I really have no idea about this so I won't try to make it sound like I do and I think you should do the same since you obviously don't either.

hasn't this being talked about enough already!!!!!!

Meh.

In a way Sony is probably lucky they weren't more successful at the start because they probably would have lost a lot more money, especially from consumers buying it as a cheaper Blu-Ray player back when it actually was that. 

I think somewhere along the line before it was released they realized the blunder they had made but were forced to release because they didn't want to give the 360 a second year uncontested in the HD console space.