Microsoft has cancelled the European launch of its Kin mobile phone, less than three months after unveiling it with great fanfare.
The phone has been available on Verizon in the US since May, but it is rumoured that only 500 Kins have been sold.
Microsoft's move comes in the wake of a decision in May by Robbie Bach, the company's head of mobile, to leave.
The firm said it was now focusing "exclusively" on the latest version of its mobile software, Windows Phone 7.
In a statement, it said: "We are integrating our Kin team with the Windows Phone 7 team, incorporating valuable ideas and technologies from Kin into future Windows Phone releases and beyond."
The company will continue to sell existing Kin phones in the US on Verizon.
Whilst Microsoft has long supplied an operating system for mobiles, the Kin was the company's first attempt to build a phone from scratch.
It was designed to tap in to the current thirst for social networking, as Microsoft's Derek Snyder told the BBC at the Kin launch: "We wanted to chase an opportunity we thought existed with young socially connected people - for folks that are obsessed with social networking".
Ian Fogg, principal analyst at Forrester Research told the BBC that the social networking model was a "strong concept".
But he said that the company may have mispriced the phone for its target consumers: "The challenge to Kin was that it was relatively expensive, similar to a high-end smartphone, where the target market, young consumers, typically prefer to pay less for their phones."
The phone also lacked some basic smartphone features, such as the ability to install third-party applications.
In May, Microsoft reorganised its mobile phone and gaming division, following an announcement by Robbie Bach, who headed that division, that he would leave the company in autumn 2010.
Senior vice presidents at the firm in charge of games and phones will now report directly to Microsoft chief executive Steve Ballmer.
Mr Fogg also attributed Microsoft's decision about the Kin to the challenge of launching Windows Phone 7, which is an operating system the firm will license to other companies, rather than making the phone itself.
He said: "Even the largest firms like Microsoft or Apple have to focus.
"The question is whether Microsoft was spreading itself too thin in mobile."
Microsoft watchers will now turn their attention to Windows Phone 7, which will rival Google's Android operating system, Nokia's Symbian, as well as Apple's iPhone and a range of other smartphone platforms.
"Given there are all these established players, when they launch Windows Phone 7 it has to be striking and different from the competition," said Mr Fogg.
"The Windows Phone 7 interface is different from the other smartphones out there; it has a concept of hubs rather than applications, so similar activities are grouped together.
"But they need to ship a product that is bug free, compelling, and responsive.
"Like Kin, there is a risk they're coming to market too late, but they can't do anything about that," he said.