With the masses using iPhones and the like, to whom is Canon marketing these cameras? Most people only need Facebook resolution, so the de facto standard smart phone is a better choice for the application.
There are still a lot of people who take pictures of their kids/family and print the pictures to put on their wall. Still lots of people who travel or do outdoors stuff where an iPhone is lacking either on the zoom, focus, or detail side of things. I'm not super familiar with the iPhone, but what is its burst rate? Oh and you can't replace the batteries, so, there goes multi-day trip use. Not to mention, an iPhone by itself costs $500+.
The market for P+S's is definitely shrinking; which is why they've become more niche products. You get these super-zoom ones, or the big sensor P+S cameras like the G12/G1X. Kinda hard to find the standard cheap 5x zoom P+S anymore because of camera phones.
