First off, Technologically. It worked. I have terrible handwriting, and the newton I had was the 100- the original message pad. It could recognize my handwriting, just fine, well north of %90 of the time. When it got a word wrong, it was trivial to correct. I was able to write on it at the same speed that I would be writing on a pen and paper. I could increase this recognition rate to %100 by altering the way I wrote, if I wanted to, but it was more convenient to write my normal way.
Further, this was all done on an ARM RISC 610 CPU running at 20Mhz with 640kb of RAM!
It was "technology from the future", and unfortunately it came at a time when, at least in america, "computer literacy" was a big thing. Many people weren't really computer literate, and having a computer in the home was not rare, but not exactly common yet.
Secondly, the Newton was not a failure in the marketplace. The device found wide adoption in industry where its unique features provided exceptional value. In places where a Palm could compete (because the newton's superior technology wasn't significantly more valuable) it didn't do as well... but that doesn't mean it was a failure as a product or was losing money. (Interestingly, NeXT, widely also regarded as a "failure" was also profitable when Apple bought them.)
The newton was building momentum and was about to be spun out in an IPO as Newton Inc, when Steve Jobs returned to Apple. I don't know the reasons that Steve Jobs killed the IPO and the product. It seems to me that letting it spin out would have been the wiser move.
I understand why it was popular for doonsbury to make fun of it, and the simpsons, etc. It exhibited a kind of hubris. Handwriting recognition? At a time when people are barely grasping the value of a computer to begin with?
I think the lesson to learn with AI like products is to make sure that the target market is receptive to the idea.
I hope people are now more receptive to Siri than they were to Newton.