The market rejected it for desktops and servers. But not in other markets. Which is why Intel is still selling in the hundreds of millions of CPUs, while ARM licensees are selling in the billions, and MIPS and PPC licensees are also selling in the hundreds of millions (but reap far less revenue than Intel, as more of are low price units going into embedded systems).
I have a feeling that the market rejected it because rewriting a ton of software didn't make sense for a negligible performance "upgrade", not because it wasn't backwards compatible. There were also emulators available to run x86 code.
> When first released in 2001, Itanium's performance was disappointing compared to better-established RISC and CISC processors. - Wikipedia
I think the backwards compatibility problem wasn't that it lacked backwards compatibility, but rather that the proposition was to pay more to run your existing binaries slower. I recall Pentium Pro having a similar problem with 16-bit code.
