Engadget asked Apple for a reason, and received this in response:
"Apple has decided to focus priorities on the iPod and iPhone and will not be making more iPod Hi-Fi units. There are over 4,000 accessories in the iPod ecosystem and hundreds of speakers systems designed specifically for the iPod, which provide customers with a wide variety of options."
Obviously if a product fails to perform, there's no incentive for them to keep it around any longer. Given that it is so easy to couple an iPod (or any media player, really) to whatever speaker system you choose, it's a good thing that Apple is sticking with their gadgets and not also getting into the analog world.