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Is the iPhone the New iPod?

Has the iPod finally reached its end? Researchers are reporting that sales of digital music players have slowed, further pummeling poor results at electronics retailers Best Buy (NYSE: BBY  ) and Circuit City (NYSE: CC  ) .

It's an ugly picture. Best Buy fell far short of Street estimates for net income in its latest quarter. Circuit City, meanwhile, suffered a 5.6% decline in same-store sales. Both retailers cited a tougher market for digital music players.

Saturation seems to be the problem. One in four American households already owns an iPod or a comparable player from SanDisk (Nasdaq: SNDK  ) , Creative Labs (Nasdaq: CREAF  ) , or Microsoft (Nasdaq: MSFT  ) .

Nevertheless, Forrester expects shipments of portable players to expand by 20% this year. That may be a far cry from the 69% growth Apple's (Nasdaq: AAPL  ) iPod enjoyed in 2006, but it's nothing worth worrying about.

Still, some observers have gone skittish. Ross Rubin, a director of consumer technology research at NPD Group, told Dow Jones that sales of cellphones with built-in music players are hurting demand for stand-alone players.

So the iPhone is the new iPod? How. Incredibly. Absurd.

Seriously, if you think the iPhone's maximum eight gigabytes of storage is enough for your average audiophile, you haven't met my neighbor. His Windows iTunes library contains more than 18,000 songs, thousands of which haven't yet made it to his iPod. There just isn't enough space.

The iPhone won't solve that problem. As much as the phone-Web browser-music and video player combo looks awesome, asking it to do everything well is like asking your dessert topping to be a floor wax.

Only in the stunted reality of Saturday Night Live commercials is that possible. In the real world, a merger of Cool Whip and Mr. Clean isn't in the cards. And Steve Jobs' flirtation with Ma Bell surely won't mean the end of the iPod.

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Fool contributor Tim Beyers, who is ranked 6,769 out of more than 30,900 in CAPS, would be interested in the iRack if it weren't so unstable. Tim's portfolio holdings can be found at his Fool profile. His thoughts on Foolishness and investing may be found in his blog. Best Buy is a Stock Advisor pick. The Motley Fool's disclosure policy is the proud owner of an iPod Flea.

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