Mary Jo Foley is reporting that the Live Mesh team, which started out as a special project under Ray Ozzie and known at first as Windows Live Core, has joined the Windows / Windows Live org, under Senior Vice President Steven Sinofsky.  Mary Jo followed up on a tip and received confirmation from Microsoft:

“The Windows Live, Live Services Platform, and Live Mesh teams will now be a part of the unified Windows Live organization under Steven Sinofsky, Senior Vice President, Windows and Windows Live Engineering.  David Treadwell, Corporate Vice President, Live Services Platform, will now report to Sinofsky and will continue his work on the Live Services Platform.”

While there have been lots of rumors and speculation about possible Microsoft cost cutting moves, including layoffs and/or reorganization, moving Live Mesh under Windows Live isn’t surprising, given that we’ve already been told that elements of Live Mesh will be incorporated into Windows Live products and services.  We doubt this is a cost cutting move, rather a long planned move to move Live Mesh out of incubation and into the mainstream.