Depends what defines a flop in this case. If you mean that not selling millions of units in the first year is a flop then yes it will flop hard. But I don't think anyone at Valve was expecting that at all. Steam Machines was never going to have a console like launch, and they were never meant directly compete with consoles. To hear Valve say it Steam Machines, SteamOS, in home streaming, the Steam controller and Big Picture is a long term initiative that was created because Steam users were increasingly wanting to have access to PC gaming in the living room with a controller. It was never meant to compete with the big three, but instead make it easier for existing Steam users to consume content in a wider verity of setups. The market for small form factor PCs for gaming in the living room has existed for years. Valve are just trying to make that experience better so that people will buy more games. The Steam Machines branding it's self really doesn't mean much more than a nice marketing slogan PC manufacturers can use for that market segment.
The SteamOS/Linux push was also because of moves that MS were making at the time to push Windows into a more closed ecosystem, which caused a lot of players in the PC space (not just Valve) to get very worried about how monopolistic Windows is. So they decided to start investing into an alternative as it would take years to set one up and if MS did go full retard it would be too late. Luckily MS seem to have pretty much abandoned their plans once they realized that the entire PC industry pretty much said FU. But competition is still good to have, and having a viable alternative OS for PC gaming allows developers to put more pressure on MS to improve which makes things better for everyone.
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