The diet works and I know tons still using it, the problem is two fold. One, atkins products were over priced, two they mostly tasted like crap, especially when the big food companies got into the game. They would have done better to licence the name than to try to make food.
You hit the nail on the head. I use some Atkins products as I am diabetic. But there are other cheaper and better tasting products out there.
You are correct that Atkins would have been better off to sell the rights to the name. However, at the time they started making some of their lo-carb foods, I don't think there were many companies actually making them. I know when I first tried some Atkins snack bars, I was in hog heaven. Now all the candy makers, etc., make them, and the new ones taste just like their sugared counterparts.