Obviously, guitar groups have been a mainstay of popular music since, so as a prediction, Decca failed. But how accurate was it as an assessment - in the early 60s, pre-Beatles, were guitar groups fading out of popularity?
I've read a lot of Beatle books and seen this story told many times. It was also told by Beatles manager Brian Epstein himself. I've never seen the story disputed by anyone involved and it is definitely believable. At the time, the Beatles were still largely unknown outside of Europe and Hamburg. Epstein was rejected by many other companies, besides Decca. The record execs just couldn't see the Beatles potential or recognize their talent or specialness at the time.
A little off topic, but another reason The Beatles weren't signed was because they actually weren't the only group being auditioned by Decca that day: The other was Brian Poole and the Tremolos. The Tremolos were signed over The Beatles mainly for the reason that the Tremolos, like Decca were based in London, while the Beatles were still based out of Liverpool and Decca thought it would take too much time and money to bring a Liverpool group down to London to record/preform