If the Itanium had an x86 hardware co-processor, it probably may have fared better, assuming Intel and HP had brought its price down to Xeon levels.
First, as already mentioned, it did. It was terrible. IA-32 EL, the software solution, did considerably better.
Second, in 2001-2010, in Itanium's target markets, nobody cared all that much about fast x86 compatibility. The lion's share of IA-32 EL use was just running computationally-trivial Windows utility software on Windows Server for Itanium. IA-32 EL existed for Linux too, but at the time there wasn't some massive pile of binary-only Linux/x86 software that the (small) Linux/IPF userbase was itching to run, so it saw little use. And remember - Windows Server and Linux
combined never accounted for more than 20% of Itanium shipments, and across the lifetime of the product, it was more like 3-5%. Nearly all Itanium systems shipped with HP operating systems.