The March of the Cheap
Once upon a time, a collection of companies ruled the workstation market, selling what were then called '1M^3' machines, machines with one million MIPs, one megabyte of RAM, and one million (black and white) pixels. With computing so clearly heading their way, companies like Apollo, DEC, IBM, HP, SGI, and Sun had futures so bright they had to wear shades.
Computers have long since surpassed the '1M^3' level of performance, yet of the companies I just listed, only Sun still really sells Unix workstations. One can point to mundane reasons for this, but there is a common decision all of them made:
All of them abandoned the low end.
(There were always solid commercial reasons for doing so, that boiled down to 'it's too hard to compete with a flood of cheap PClones'.)
The problem with abandoning the low end is that the march of computing progress (Moore's Law and all) means that the low end keeps moving upwards. As it moves upwards more and more computing becomes low end computing, and the 'high end' keeps shrinking. As the companies abandoned the low end they were left chasing a shrinking and ever more competitive market, with the sort of results you'd expect.
Competing at the low end of the hardware market isn't easy. There's no guarantee that any of these companies could have succeeded at it. But by giving up on the low end, they guaranteed their slow diminishment and effectively cut their own throats.
The peculiar case of Sun
I was going to subtitle this '(why I think Sun is doomed)', but friends have told me that these days they may be price competitive for small servers and what 'workstations' have turned into. (Naturally, these are based on commodity PC hardware.)
The question of whether Sun will stay with Solaris is an interesting one. It boils down to whether they can afford to continue paying for Solaris development, which comes down to how much of a premium Sun's marketing people can convince people to pay for Solaris. Since Sun spent years successfully persuading people to buy expensive under-performing workstations, I suspect that Sun's marketing department is pretty good.