They were playing Russian Roulette with their whole business model, they got themselves in trouble way before 1993: they had a very strong run of luck.
They really started having some stern competition from White Wolf on one hand and many CCGs and computer games on the other. (And probably yet other hands I'm not thinking about.)
It's amazing how high quality a lot of the '90s TSR material really was, though. Planescape, al Qadim, and Dark Sun, just to name a few of their lines were really excellent. Seriously, take a look at the material from then---it was well-written, clearly thought through, and often had quite good art and play aids, too.
It might well have helped them to have update the ruleset more, though. 2E was really a bare update on 1E with the decision to make such a minimal change due to, as far as I know, the fact that there was a bunch of 1E material sitting in the warehouse.