Just look at the line that Yamaha currently carries for electric guitars, effects, amps, etc. It's an extremely small arsenal they offer. I'm a tinkerer (as I'm sure most of us are here) and a deep thinker, point being, I like to learn everything about the investments I execute. I've been following Line6 since the mid 90's, and I concur with you guys. Employee opinion of the company has significantly dropped over at least the past few years. I have owned a: Pod 2.0, DL4, XT Live, M9, M13, JTV, Pod Farm, and HD300. With exception to the DL4 and the Pod 2.0, the product range has always had hiccups, and problems with premature product releases. The customer service has never been that great, but you can see that the number of employees (or lack of) contributed to this. The focus was never on customer service, which especially now more than ever, is the main focus for companies which thrive today.
Yamaha is a great company in regards to horizontal diversification. Vertical improvement for the majority of their product line is mediocre. Most people like buying products from companies which specialize in those products (aka. Martin, Fender, Mesa, etc). There is no question that Yamaha has diversified to the extent which it has (anything from jet skis to mixers), because it is a solid business model to pierce your tentacles within as many sectors of the marketplace as possible. Is Yamaha a solid company? Sure. Do they provide an argument to be the best in any one thing? Maybe. They have no guitar line (besides acoustics), unless you call a handful of guitars averaging ~$500 a line. Yamaha wants to diversify using Line 6, because they knew Line 6 was hitting a wall and could buy them out (entirely) for a great price, and therefor providing an avenue for them to keep their miniscule electric line afloat. IMHO Yamaha is about the business model more than anything else, and in that light, and that light only, they are solid.
Lastly, and more succinctly: Yamaha (company with obvious horizontal diversification focus) + Line 6 (company with decelerating innovation and employee dissatisfaction) = a mediocre product and disenchanted consumers. Line 6 management received their payout, which for several years now, is an easy conclusion to see based on the trend they've envoked.