According to Goto's sources, Larrabee simply didn't offer the sheer power Sony was looking for. Instead, Sony is likely to pursue one of two options for the PS4: use a modified and improved version of the Cell architecture (as previously rumored), or develop a "normal" multi-core CPU akin to the chips found in personal computers and the Xbox 360. The latter option, of course, would help woo back developers turned off by Cell's unconventional design. However, an unnamed SCE executive isn't counting Intel out of the game yet, noting "Larrabee can help us to plan PS5 and PS6, but it cannot make it into PS4."
Considering Sony has yet to decide on an architecture for PS4, it's clear that Sony's next-generation console is still years away. Good thing too, because by Sony's calculations, PS3 still has seven years of life left in it.