Sauber's announcement that it would run Honda engines next year came somewhat out of the blue, but in terms of surprises it's knocked out of the park by the follow up which tells us that the deal is off for 'strategic' reasons.
It's likely that the change has more to do with driver placement than any concerns over the reliability or performance of the Honda engine.
Both Mercedes and Ferrari have young driver development programs which require the creation of an unofficial junior team. The limited amount of testing time available to new drivers means that teams often hold onto older, more experienced heads when faster, more promising youngsters are available.
For Ferrari that means that both Antonio Giovinazzi and Charles Leclerc are ready for a move into F1, whilst Mercedes have Pascal Wehrlein installed in a Sauber already. An engine deal with either would certainly come with a guaranteed seat for a young driver.
What does it mean for Honda?
Currently it is looking like McLaren will be switching to Renault engines for 2018. Which would leave Honda without a partner in F1. It could make one of many decisions as a result.
Abandon the sport entirely and find somewhere to lick its wounds - Formula E would seem like a good candidate here. Spend a year developing an entirely new engine which remedies the problems inherent in its current design and then seek a partner for 2019. Which seems an expensive remedy and one which risks another failure down the line.
Most likely though is a partnership with one of the few remaining independent teams on the grid. Red Bull may not be prepared to risk its A team with Honda, but Toro Rosso would be an ideal place to learn the engine and support its development until such time as it's competitive enough to promote to the main team. A similar thing to what it does with drivers.
Otherwise Williams and Force India seem good bets, although Honda would need to fund lost performance earnings for either team if they jumped from Mercedes.
Given Honda's chequered past in F1 it would be disappointing if they were forced out because of the restrictions enforced by the current Concorde Agreement. Nevertheless that looks like a very real possibility at the moment.