Unfortunate news.
Just the ridiculous notion of paying a few hundred bucks for a supercomputer-on-a-chip that could possibly give a 15 year old 10 million dollar Cray system a run for its money, at least for a few functions, sitting in my PC running games makes me smile. Could have been a fun toy for folding and other stuff too if a compiler was released for it.
But for a business perspective it makes no sense at all to go after gamers when you could sell the exact same chip to cloud companies like Google and Facebook, data centers, Universities or the military for $4000 per chip for HPCs that may incorporate anywhere from dozens to even thousands of CPUs.
I'm speculating, but if Larabee could allow Intel to build something that can keep up with Cray's Jaguar or IBM's Roadrunner at a much smaller size they would be swimming in new market share and revenue.
It has been said this was the original plan with Fermi before it became a gaming GPU, but I'm sure Larabee's networked x86 design would be more compatible with existing software and super computing infrastructure.
Good business decision, but I'm bummed none the less.