Microsoft has just announced today the company will merge its Office Live and Windows Live products under one brand and product. Essentially, Office Live products are productivity extensions that include programs such as Office Live Workspace, Office Live Groove, and Office Live Small Business. Windows Live products are more geared towards consumers and include services such as Windows Live Messenger. The merged software packages will be available by the end of the year and should coincide with the release of Windows 7. Microsoft says the move comes to simplify the user experience.

In other news, Microsoft has just announced the closure of its ACES Studios division, which is the same team that develops one of Microsoft’s oldest offerings, Microsoft Flight Simulator X, which firstly debuted in 1982. Microsoft declined to provide details regarding the future of the product, but affirmed Microsoft is committed to the Flight Simulator franchise despite the closing of ACES Studios. The closure comes as a broader plan by Microsoft to cut costs, including the announced layoffs of up to 5,000 Microsoft employees.

In other news, Microsoft also reported revenue for its Zune portable media player is significantly down. Microsoft said Zune revenue was down $100 million (54% down) from the same quarter year over year. Microsoft simply attributed slumping demand in the product. It is also important to note that Apple, during the same period, experienced a 3% surge in iPod sales.

Yet more Microsoft news today, the company has paid the U.S. fed $3.1 billion in tax debt subsequent to an IRS audit.

Aggregate sales for Microsoft were up 1.6% to $16.63 billion in the quarter. Net income was down 11% (compared to last year in the same period) to $4.17 billion in the quarter.

Microsoft has also announced it would extend the Windows 7 Beta download through Feb. 12, 2009. There is also no longer a download cap. You can download Windows 7 Beta here.