Sony approached IBM to create the Cell processor in 2001, with plans to target a Christmas 2005 launch for the PS3. Microsoft approached IBM in 2002, and it appears Sony agreed to let Microsoft not only see early prototypes of Cell, but purchase components as well. "All three of the original partners had agreed that IBM would eventually sell the Cell to other clients. But it does not seem to have occurred to Sony that IBM would sell key parts of the Cell before it was complete and to Sony's primary videogame-console competitor. The result was that Sony's R&D money was spent creating a component for Microsoft to use against it," the Wall Street Journal book review summarizes.
While the end result for Cell and Xenon are both quite different, it's ironic to think that Sony may have inadvertently aided its primary competitor. Of course, console success stories are always based on quizzacle corporate decisions. Let's not forget that Sony's first console, PlayStation, was originally a collaboration with Nintendo to make an extension to the SNES.