Intel took the loss of the Xbox 360 CPU to IBM pretty hard, they interpreted the Xbox to be a harbinger of x86 based consoles instead of proprietary RISC (primarily MIPS at that time) platforms - a high volume market they could dominate or atleast share with AMD.
Instead all three next generation consoles went PowerPC. Intel reasoned they could re-enter the market with a relatively low-cost single chip solution which would have been Larrabee married to a derivative of the Core architecture. If Larrabee is toast I would reason Sony, Microsoft and Nintendo all shot them down.
Unfortunately graphics is something Intel is simply horrible at, they have tried multiple times to build a practical 3D accelerator but they have tried to build it on the foundations of a dumb frame buffer, they then have to compromise that weak design further as it has to cohabitant with the chipset northbridge without either making the die too large or run to hot.
But Nvidia or just give up already,
pardon me, BUY Nvidia.
Anand's Thoughts on Intel Canceling Larrabee Prime
Interesting graphics.