Microsoft's Live Labs is getting a makeover, or rather a haircut.

The 3-year-old technology incubation group, which already has led to improvements in Silverlight and the development of photo software Photosynth, is shedding a few projects and reorganizing a bit as the whole of Microsoft seeks to soften the blows of the recession.

Live Labs will move from a "broad and comprehensive" focus to one more narrowly tailored toward a few subject areas. Live Labs will focus on "Web experiences," including rich data exploration and information retrieval, discovery, navigation, and organization in Web search and other online scenarios.

A Microsoft spokeswoman confirms the economic downturn was part of the reason for the group's shift, but says this will allow the team "to focus on investments that are more likely to directly impact the company" in a larger way.

While Live Labs head honcho Gary Flake, formerly of Yahoo, will continue to head up the group and will continue to report to Microsoft chief software architect Ray Ozzie, parts of Live Labs will rejoin product groups. For example, the Live Labs blog notes that its Social Streams social media content aggregator will become part of MSN, and pieces of the engineering team will move to work on Windows Mobile, Live Search, and advertising.

Microsoft has about 20 incubation "labs" in other product groups, like adCenter Labs and Office Labs. It's unclear whether they are getting hit in a similar fashion to Live Labs, but it's entirely plausible. "Organizations across the company are looking at ways to increase efficiency, at the same time as increasing output and incubation will remain important to the company," said a Microsoft spokeswoman.

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