Piggybacking on the article TheFedora posted, here is another article from Game Informer that talks about what went wrong with LucasArts. It's really in depth. Page 5 talks about the Indy team's reactions when Uncharted was unveiled.
One LucasArts employee remembers that day well, as a large group of Indiana Jones’ developers gathered in a demo room to check out Naughty Dog’s work. “I have never seen a more f---ing forlorn group of guys, because that is exactly the game they were trying to make,” this staffer says. “Indiana Jones had a cistern level – same as in Uncharted – it had similar jungle environments, too, but one of the big things that they were attempting were those run-for-your-life moments, where something happens, the camera turns, you have a different perspective that shows the danger behind you, and then you have to control the character out of it – which is exactly what Uncharted did. They had effectively out-Indy’ed Indy.”
You can check out the whole article here:
Fall Of The Empire: How Inner Turmoil Brought Down LucasArts
It's a great read.