Canondale went bankrupt in 2003. They were bought by a holding company who them sold them off to Dorel. "Cannondale" ceased to exist in 2003 and really had no say in the matter. Bottom line is that they were not doing well, so why would the company that bought them continue to do what wasn't working?
I suspect the debt from the failed motorcycle experiment did them in. And the holding company that bought them wasn't trying to turn them around, just sell 'em off. That was always the plan. Like I said, I think they were successful as a bicycle company and sucked as a motorcycle company. If not for that bad decision they'd have been fine as an "East Coast Specialized" type of company.