They had plans with them for a CD version and/or extension of the SNES, but they ended their partnership with Sony when Sony announced the thing publicly before Nintendo agreed on the licencing points.

All documentations I watched and read report it the other way; Nintendo had plans with Sony to create a CD addon for the Super Nintendo, called Nintendo PlayStation. But there was a problem for Nintendo, as they realized the contract was not in favor for Nintendo. All or most money for all sold games on the CD addon would go to Sony. This also meant Nintendo was helping to create a market competitor and to prevent that they changed plans without notifying Sony.

Then on the public show Nintendo suddenly announced the partnership with Phillips. Sony couldn't showcase their CD addon later in the show and was hit with a punch by Nintendo. That was a very bad position for Sony to be in. Sony created their standalone console Sony PlayStation out of this misery, started big campaigns and snatched even Final Fantasy as an exclusive. Meanwhile the Philips deal didn't workout well and the licensed games were trash. And the rest is history.

This is the story about the Nintendo-Sony breakup I know of.