We've been sitting on a tip for a while until things came into greater focus, but now that the speculation meter has exploded (see this CNet story), it's a good time to tell you all what we've heard. It seems that the "product transition" Apple mentioned on the last earnings call could very well be within the iPod line. Specifically, if you want to buy an iPod shuffle or iPod classic from Apple, you should do it sooner rather than later. We've heard those two iPods are getting the axe this year.
It makes a lot of sense, but only partly due to the numbers CNet mentions. The classic is a holdover from 10 years of iPod existence, bearing many similarities to the original iPod. The shuffle is basically the same form factor as the nano, minus a screen. The classic uses a platter-based hard drive, while Apple is largely transitioning to flash-based memory solutions. The shuffle's lack of a screen has been an issue since it first appeared as a memory stick with music playback functions. If Apple killed these off, all of its iPods would have touchscreens, and something tells me it wants it that way.
Obviously we can't divulge our source, but it is NOT an analyst. Most of us listen to analyst predictions with the proverbial grain of salt (or bag of salt). We feel pretty confident that Apple will soon discontinue the shuffle and classic, and we see few changes coming for the iPod touch -- unless you're super excited about it being available in white. The nano will then become Apple's lowest-end iPod (we've heard nothing about a price drop, however) and the iPod touch will remain a premium iPod with its current form factor intact.