Microsoft is working on a Surface Mini in addition to the Surface 2, and Surface Pro 2

There have been rumors about a 7 or 8-inch Surface tablet in the works because one of the first features made known of the Windows 8.1 update was that it would bring support for smaller tablets. It was unclear whether Microsoft would be making the device itself, but since the company looks to be taking the reigns of mobile Windows hardware, this new rumor seems pretty reasonable. 

Unfortunately, there is no real information available on the Surface Mini. We don't know if it will have the same kickstand as its bigger siblings. We don't know exactly what size the display will be (but somewhere in the 7 to 8-inch range seems like a solid bet). And, we don't know if it will have specially sized Touch or Type Covers as accessories. We'll try to find out more, but if we had to guess, we'd say there's a good chance that there will be a leak on the subject soon after Apple's iPhone announcement next week.

source: Unwired View via IntoMobile