The sibling duo were snapped up by the music mogul's SyCo label in early 2008 after finishing in third place on The X Factor's fourth series.
However, the pair discovered that they had been dropped by the label last month following disappointing sales of their debut album Pop and single 'We R One'.
Speaking about the decision in an interview with The News, Sean Smith admitted: "We still think there were four or five more great songs on the album that could have been singles and helped to sell a lot more copies of the album, but that's the music industry."
Meanwhile, his sister Sarah has insisted that the axing will prove to be a blessing in disguise - as they felt restricted by Cowell's wishes.
She commented: "It's not a bad thing actually. Now we can take our album to Asia or Australia where pop music is particularly thriving. We can do what we want because our management doesn't have to run everything past SyCo."
X Factor's 2007 winner Leon Jackson was also dropped by Cowell in March.