Microsoft Working With Suppliers on Designs for Touch-Enabled Watch Device - WSJ.com

That was probably the SPOT Watch

"Research firm Gartner expects the market for wearable smart electronics to be a $10 billion industry by 2016.
This isn't the first time that Microsoft has shown an interest in wearable gadgets. Microsoft a decade ago unveiled a "Smart Watch" powered by the company's software. For a subscription fee, Smart Watch wearers could have news headlines, sports scores and instant messages beamed over FM radio to their wrists. But sales stopped in 2008.
For its potential new watch prototype, Microsoft has requested 1.5-inch displays from component makers, said an executive at a component supplier."

Microsoft Working With Suppliers on Designs for Touch-Enabled Watch Device - WSJ.com