It's ironic because on the one hand, it was a logical and sensible move to scrap it because as an add on it would have surely failed like Sega CD. And yet, on the other hand, it would appear that taking it on the chin with a failed peripheral device actually would have been significantly smarter than allowing Sony to become a competitor of massive influence and power in their own right.
Just imagine how much that one call made by Nintendo dramatically shifted the future of video games forever.
There's actually a little bit more to it than that. Keep in mind that Nintendo didn't drop Sony because they were shuttering the device. Nintendo dropped Sony to work with Phillips instead. This actually had the exact opposite effect on Sony's management as they didn't want to even enter the gaming industry after the public humiliation that Nintendo gave Sony by announcing Nintendo's partnership with Phillips at CES
right after Sony talked about working with Nintendo. If it wasn't for people like
Olaf Olaffson, or
Ken Kutaragi, Sony never would have made the PlayStation. In fact, I consider Kutaragi's actions to be very "un-Japanese" as he essentially ignored Sony's wishes and worked on the PlayStation anyway.
You also have to keep in mind that SEGA of Japan was also at fault for the creation of the PlayStation.
Tom Kalinske, the president of SEGA of America, wanted to work with Sony on making the SEGA Saturn, and since Sony was a partner on the SEGA CD, he was good friends with Olaffson already. Sony was actually receptive of the offer to work with SEGA, because it presented far less risk than going out on their own. In the end, SEGA of Japan refused to work with Sony, and instead decided to go with the incredibly complex Hitachi setup that we know of today.