EA Sports boss, Peter Moore, the person you might also remember as an ex-Microsoft player, admitted in an interview with The Guardian that he was the one who pulled the plug on Dreamcast.
Sega had a great start and was selling really well, but as PS2 launch was drawing closer, the company had to sell a fixed number of consoles each month just to keep their head above the water in the console market. And since that number was just impossible to achieve in such a short period, the final decision had to be made.
Apparently, there was an option where Sega could invest more money, but that would present a realistic danger of going bankrupt, so this was the smart thing to do.
Still, Moore is proud of what Dreamcast and the team behind it achieved, as they were quite the competitors, for a while at least. He also mentioned he never met anyone who had regrets over buying the Dreamcast and how he still has his.