From what's been said, MS was working to try and bring Win 10 IOT to the Band. Anyone developing an interface is going to have a "usability lab" where they bring in different people to try out their designs to see what design elements work and what needs improvement.
I suspect the usability lab found that that the screen form-factor and placement was a problem they just couldn't satisfactorily overcome. Now, if our writing system was like the Japanese, with writing going from top to bottom, that would be perfectly fine. But with the predominate system of writing going from left-to-right, "portrait mode" on a tall skinny display doesn't work. But the problem with landscape mode is that it's awkward to get into a good reading position. If you wear the display on the underside, then you have to rotate your wrist each time. If you wear it on the top, then either it's going to be at a angle or you have to reading it at a distance. If you bring in your other hand to start to manipulate things, it gets worse.
I think MS embraced the band format based on the success of wearables like Fitbit among the younger generation. But I think the usability lab was finding serious limits to the form factor.
My hope is that MS is working on a new non-Band wearable. Most likely a watch, but perhaps they have come up with another format.
While Band 2 had it's problems, I still think the wearables market is young enough that there's a good possibility for major expansion. While the Band is not a market leader, I do think there's still room for someone who finds the magic point of features and price. Most of the other technologies people like to bring up (Zune, Win RT) were technologies that weren't going anywhere and had no prospect to break out. While not dead, the expiration date was in sight. Wearables is still a new frontier. And I'd think the idea you could tie servers, PCs, tablets, phones and wearables into a common OS (or at least a common family/development system) would be a strategic position to take.
So, I'd imagine they're going to go to something closer to Android Wear or Apple Watch.