I agree that the growth of Sierra lead to some decline, but for different reasons. From my own perspective, Sierra was leading in technology and that required me to upgrade constantly. I could not financially keep up the pace. At the same time Sierra was creating so many games that I wanted to play at the same time. Buget wise, I had to pick and choose which ones I wanted to play. It tended to be any game from King’s Quest. Sierra was also changing their style as seen in King’s Quest VII.
To me the different companies that Sierra had only made stronger. If one area fell the others would possibly survive and/or grow.
Ultimately, Sierra was a target for some bad individuals that changed the leadership of Ken Williams through lies.