Read a little further: "As for compact digital cameras, while highly functional PowerShot-series models contributed to healthy sales, unit sales for the third quarter declined from the corresponding period of the previous year due to sluggish market demand."
Also: "Demand for compact digital cameras is anticipated to increase for models offering high functionality and high added value."
Canon is acknowledging sluggish demand for compact digital cameras and targeting higher end models (In particular the G1X and EOS-M). So, yes, they recognize that the traditional low-price consumer PowerShot models are not doing well and they are targeting the higher end.
This is a problem for all camera manufacturers, not just Canon. For years, profits from low-end consumer models have provided a foundation for manufacturers to build off of. DSLR sales remain strong and profitable, but will there ever be sufficient demand to replace the revenues lost from compact digital sales? I doubt it. It would not surprise me to see Canon's imaging business unit (cameras) and similar units within Nikon, Sony, Fuji and others all shrink considerably in the coming years. Bad news for employees who work on the production lines for compact digital cameras. But, since the ultimate success of a company is based more on return on investment rather than gross sales, a smaller, leaner imaging business unit doesn't necessarily spell doom.
Companies get in trouble when they fail to adapt to changing market conditions (Kodak). Those that anticipate and adjust succeed (Fuji).
Part of Canon's (and Nikon's) strategy seems to be to diversify the DSLR product line: maintaining a full range of APS-C models while expanding their Full Frame offerings. But, the DSLR market is fairly mature, so they also need to capture new customers with the high-end compacts. Manufacturers must navigate generational and cultural differences and the high-end compact offerings are part of that strategy.
There is absolutely NOTHING in the report that supports many of the posts on this thread. It might be fun and personally satisfying to misread this report to confirm pre-conceived ideas of what Canon's pricing strategy should be for a product that a forum participant happens to think costs too much, but the financials simply don't support any of that wishful thinking.