After the death of the Kin, it seems Microsoft hasn't given up on mobile phones. It seems they're working on a device called Menlo, which is described in the “User Experiences with Activity-Based Navigation on Mobile Devices,” (PDF) paper that Microsoft has released. In that paper is written:
“Menlo is a prototype mobile device with a capacitive touch screen (4.1″ diagonal, 800×480) running Microsoft Windows Embedded CE 6.0 R2 which incorporates a Bosch BMA150 3-axis accelerometer and Bosch BMP085 digital pressure sensor (barometer).”
ZDNet's Mary Jo Foley says that she doesn't think Microsoft is building an actual device but just an OS for other devices to use.