> Adding a second Cell

As I read the article linked to above the PS4 is rumoured to be powered by a single (new) Cell processor with 16 SPEs. Maybe this new Cell will have two PPEs (like the cancelled PowerXCell 32ii was supposed to have, only with half the amount of SPEs) but I doubt they will put two Cell chips there as I think it wouldn't make sense if they're going to have a new Cell chip developed anyway.

> IBM didn't stop Cell development

Indeed.

https://morph.zone/modules/newbb_plus/viewtopic.php?forum=3&topic_id=6768&start=35
https://morph.zone/modules/newbb_plus/viewtopic.php?forum=3&topic_id=6993&start=80

> they publicly canned one chip

Actually, it was two chips.

https://morph.zone/modules/newbb_plus/viewtopic.php?forum=3&topic_id=6993&start=70

> everyone thought Cell was dead

Yes, which was surprising as the declaration of death was qualified almost immediately:

http://www.hardwareheaven.com/news.php?newsid=344

> They had been working on a 32SPE + 4 PPE chip

...and one with 2 PPEs.

> with the PPEs based on a POWER7 core.

Interesting, I hadn't read that anywhere before. I'd rather have suspected a POWER6 offshoot. No IBM roadmap document on PowerXCell 32ii and 32iv I ever came across mentioned the base of their enhanced PPE called PPE' therein. A quick googling revealed this as the source for the POWER7 claim (translated):

http://translate.google.com/translate?sl=ja&tl=en&u=http%3A%2F%2Fd.hatena.ne.jp%2Fpetacell%2F20080621

Thanks for this bit of info.

> they said they were merging Cell with something else, presumably POWER.

Yes, that's what I understood as well (see first two links).