I think the UK/US fashion for derailleurs, which deliver far more speeds with barely any efficiency loss*, was the problem. MTB was the other - SA couldn't deliver the kind of gear range required.
Technically Sturmey didn't go bust - they were the victim of a highly leveraged buyout by Lenark which went wrong. The Taiwanese have done a pretty good job with the brand (and designs) so far.
*generally, hub gears with lots of speeds are pretty inefficient; the SRAM 7 speed is quite clever as it only ever uses one planetary geartrain (three suns, three-stage compound planets, one gear ring), but some of them use three planetary stages in series, and each one saps 3-5% of power.