Companies can and do collaborate all the time on projects like this. For example, nearly every embedded device that gets sold in the US is the product of a collaboration between the original vendor (OEM), a bunch of component vendors, at least one manufacturer, and at least one retailer.
It sounds to me like what happened here was just scope creep and its close cousins, wheel reinvention and empire building. This is similar to the One Laptop per Child project, where all they had to really do was do board bring-up on an ARM, and then spend some time polishing it to give a good user experience. But that wasn't sexy enough, so they decided it would be more fun to rewrite the whole stack, including the entire window manager, all of the applications, and large parts of the system daemons. Of course, with all this wheel reinvention going on, there was no time to polish anything, and the system shipped with a lot of known bugs and limitations. Later some hobbyists unlocked the hardware and put Ubuntu on it one weekend, resulting in a laptop that was much, much more functional.