Exactly, which was the smart thing to do. As much as the idea of Newton had a lot of potential, and in as much as we can draw retrospective parallels between Newton's potential and that of iOS, Newton was simply wrong for its era. It was ahead of its time in many respects -- particularly, in that telephony would become the central driver behind the idea of getting everyone on the planet to carry a device around in their pockets. Newton predated ubiquitous cell phone usage (and cellular infrastructure). In other respects, Newton was not necessarily too "late," but perhaps insufficient. It was not a viable alternative to the productivity of laptops, nor could it have been, given the ecosystem that existed at the time. Could it have powered embedded devices? Sure, but to questionable profit-margin potential for Apple. Embedded devices was an extremely fragmented marketplace back in Newton's day. (Still is today, in many respects.)
It's important to keep in mind that the iPhone worked because the world the iPhone depended upon was ready for it. The world that Newton would have depended upon did not exist when Newton debuted, and would not exist for the better part of a decade.
