If the Mac was so great, why did it lose? Cost, again. Microsoft concentrated on the software business and unleashed a swarm of cheap component suppliers on Apple hardware. It did not help, either that suits took over during a critical period. (And it hasn't lost yet. If Apple were to grow the iPod into a cell phone with a web browser, Microsoft would be in big trouble.)
Excerpt taken from Paul Graham's excellent Hackers & Painters, published in 2004.