I always viewed it as Intel royally screwing HP in order to get access to some of the IP that they needed to speed up the Pentium processor.
PA-RISC was a fairly nice processor that HP had developed from discrete logic into multi and then single chip designs. For a preiod of time in 1990-1994, HP, Digital and IBM went head-to-head to try to produce the fastest chip/system. But rapid development of processors is an expensive operation, and HP did not commit to the same level of resource to keep the processor development going.
When Intel wanted to speed up their x86 processors, they needed to use technologies that they did not hold the rights to, mainly for the superscalar and deep pipeline techniques. They approached HP with an offer to take on the development of the EPIC processor which was to succeed the PA-RISC2 64 bit implementation in exchange for the rights to use some of the technologies that HP used in the PA-RISC family. This enabled Intel to produce faster and more competitive x86 cores (I think the first Intel processor to benefit was the P6 Pentium Pro), and in theory removed the cost of developing the next generation 64 bit processor from HP.
When it came to producing the processor that they promised to HP, Intel were a bit tardy. They produced the original Itanium which was something like 2 years late, was not as compatible with PA-RISC2 as it was supposed to have been, and was slower than promised. Compared to other contemporary processors, the Merced implementation of Itanium was considered very disappointing. So Intel benefited greatly with their own processors, and HP suffered.
This left HP with a gap in the late '90s that meant that they had to continue using the PA-8X00 processor family beyond it's natural lifetime. The fact that HP managed to get significant performance increases by iterative evolution was probably a testament to the design of the original processor and the people remaining in HPs processor development team.
Sounds like HP are still being screwed over. I wonder if there is anybody left in HP who regrets the decisions taken back in the mid '90s.