According to Digitimes, Intel is preparing to phase out their Xeon 5000 series server processors, as well as their Xeon 7000 series later down the road. The Dempsey and Paxville core processors being phased out wouldn't be a huge surprise, given that they did not sell well and were very quickly succeeded by newer iterations, including Tulsa and Clovertown.
The processors are supposedly going to be phased out starting in August of this year, making them one of the shortest-lived Intel processors ever to reach market. With the immense number of choices that Intel presents with their server lineup, simplifying it may make it easier to for customers to decide.
Given that there is no price advantage in obtaining the older core Xeons anyway, there is no particular reason for them to be sold in the first place.