It was no secret that Microsoft Operating System Group chief, the Terry Myerson is/was no fan of Windows RT operating system that currently powers the Surface RT and Surface 2 devices. And it's also widely believed that Myerson's team is in the midst of revamping the version of Windows that runs on ARM so that the same version of Windows will be able to run on ARM-based Windows Phones and smaller ARM-based Windows tablets.
Secondly, Microsoft officials said that the reason the company got into the PC/tablet business was to address the segments of the market that its partners couldn't/wouldn't. There are already a few affordable 8-inch Windows 8.x tablets on the market from Dell and Lenovo, among others.
Update 2 on May 21: Neowin is reporting that Microsoft went so far as to make 15,000 to 20,000 Surface Mini units before deciding to put the announcement on hold. These units aren't being warehoused and dumped; they're probably test units or partially finished product, I'd bet. Like I speculated above, the reason for the hold-up could be the unavailability of Office Gemini, Neowin claims.