It makes sense as it is unlikely to them much good, they lost the dick context thanks to MSFT announcing a new more powerful system set to launch next year.
Neo is going to sort of break their user base, bother the publishers without realizing the goals for the system which I guess are providing highest quality VR or support for higher resolutions and framerate (on console obviously).
Msft is shortening this gen, in my opinion the Neo is to bind Sony further in this gen and delay their reaction to MSFT moves (Pc + scorpio). Neo is to raise, even though slightly the development costs, split even though slightly their user base, etc. Much a do about nothing and a move against their best interest at this point (keep Msft well in the back seat till the next round of console). To me the Neo no longer fit the landscape.
Another thing is I think is that Msft move and design choices for their next generation system may be a little anticipated and forced, it is a bet just that guts feeling, but i would not surprise me if Sony can make better choices than if they give them self max an extra year to ready their(s) systems(s).
As for the difference between the systems, it could be a lot, there is FLOPS, pixel rate, bandwidth, CPU max serial performances, the overall memory set-up, etc.
That is the rational side for perception... I would expect it to be worse.
If it is to late to cancel well...they should be wise to lower their production estimate as I can easily the thing turn into a device collectors like.