Why did Intel drop the Itanium?
Performance was very disappointing compared to expectations and it didn't sell well compared to Intel's x86 architectures.
Intel talked me into building my Hamilton C shell on Itanium running Windows NT sometime around 2000 for a trade show. Itaniums were hard to come by so I used a VPN to a machine in their lab. Having already built versions for NT on x86, MIPS, Alpha and PowerPC, the "port" was trivial, just minor tweaks mostly to my makefiles. I think it took me maybe a half hour.
But the performance was truly underwhelming, definitely so over the VPN, and still disappointing when I got to the trade show and could try it right there in person. Itanium went nowhere because it wasn't a great product and nobody bought it.
Added:
For a while, Intel touted my experience porting to the Itanium using their VPN remote development experience on their website. Gone now but snapshotted at archive.org, here's what it said in their remote FAQ:
Q: Do you have a customer I can talk to about the Remote Access service?
A: Yes, Hamilton Laboratories*. For an in-depth look at the benefits Hamilton Laboratories derived from the service, see the Hamilton Laboratories case study.
In the "case study" it says I built an Itanium version because customers were clamoring for it. But I don't recall ever selling a copy for Itanium. Sold them for everything else, including PowerPC (and how many of those running NT do suppose there were?) just never for Itanium.
Challenge: To accelerate development of its Hamilton C Shell product to ensure a favorable time-to-market port of its customers' architecture tools for Intel® Itanium® and Windows* 2000.
Solution: Used the Remote Access Program, including high speed Internet access and Shiva® VPN client to access an Itanium development environment, modifying source code and make files, testing debugging and recompiling 64-bit application remotely in just 7 hours time.
Quick answer: Poor performance. Intel tried to release a revolutionary product when they should have evolved to the product they wanted.
More specifically: The processor was not fast enough under general circumstances. Intel released the processor just as the processor speed to memory speed gap was widening. Itanium, being a Reduced Instruction Set (RISC) processor required more bytes-per-instruction than its cousin, x86 variants. The increased memory load, caused the processor to run slowly.
All this was exasperated by the entire architecture being, essentially, a first release. While RISC itself was not a new idea, many of the hardware components were and needed new layout designs. There were also many new ideas in the Itanium instruction layout which needed to be thoroughly digested by the development community before high-quality software would become available.
In the end a lot of technology did end up getting used in Intel's existing release of chips - just not easily visible to the end-user.
The itanium is a great design if you can leverage it advantages.
Sadly this means you will need a very advanced compiler to do this. Or even one per specific model of the CPU. (E.g. a newer version of the Itanium with an extra feature would require different compiler).
Creating such a compiler once is a hard task. To do that for every variation of a CPU is not economical.