They let the software become buggy and unreliable. It's that simple. In the meantime, other notetaking apps came along that were able to compete, and a lot of them are free. There is clearly still demand for this kind of software.

I don't think it mattered that Evernote was selling branded Moleskines and wallets -- that was a weird thing to do, but I have a hard time believing that sucked away all the resources from engineering for the core app.