The grim bit isn't so much having a given deal work out less well than hoped; but the downright absurd category error that made the idea seem even remotely sensible.
When you are peddling a bunch of expensive, reasonably tightly interconnected, enterprise datacenter widgetry and 'solutions'; it's not terribly uncommon to have re-badge versions of competitor's products, in areas you are weak in, so that you can satisfy the customer who wants everything wrapped up in a single vendor relationship, single point of contact, warranty and support agreement across the entire package, and so on. To this day, for instance, HP will sell you HP-colored Cisco switch gear that slots into their blade server chassis. They would obviously prefer that you buy their own, which they also have; but they'd rather sell you a big pile of HP blades and some Cisco switches than sell you nothing because you can't get the switches you want. Other vendors do the same sort of thing, as customer demand and the strengths and weaknesses of their offerings dictate. I'm sure it works out better some times than others; but it's broadly sensible.
The mindblowingly incompetent bit is, for some reason, applying the same logic to a consumer electronics widget; and then sealing the defeat by failing to secure important basics like "will our rebadged model get updated when the ipod does, or will we be left peddling last year's toy for as long as Apple feels like it?". That's what is just grim about this little tale. You don't come out ahead in every deal, yeah, so it goes; but running a company that sells, and has for years, to both enterprise customers and individuals; and not understanding the difference clearly enough to see that ipod buyers have different priorities than people buying blades or SANs? Seriously?