I think Silverlight was making deep inroads in the enterprise market for rich internet apps and that this was a growing customer retention issue for Adobe with Flash. That's part of why they invested so much in Flex and AIR as a more engineering-centric alternative to the Flash app's designer-centric timeline interface. They wanted to shore up what they were losing to Microsoft.

The consumer usage of Flash was most visible (games, cartoons, brochure sites, video streaming) and Apple's evisceration of that market was what ultimately killed Flash, but things were already looking grim on several fronts before that happened.