Microsoft will rebrand Zune into Windows Live services despite the company’s denials that it’s “killing Zune.”

Yesterday, WinRumors reported that Microsoft is planning to merge some Zune services into the Windows Live brand. Microsoft quickly issued a statement denying that the company is “killing Zune”:

We’re not ‘killing’ any of the Zune services/features in any way. Microsoft remains committed to providing a great music and video experience from Zune on platforms such as Xbox LIVE, Windows-based PCs, Zune devices and Windows Phone 7, as well as integration with Bing and MSN.

Microsoft’s Zune dead denial misses the point. Both WinRumors and Paul Thurrott reported that the company will transition the services over to Windows Live but Microsoft chose to point out that it’s not “killing” any of Zunes services or features rather than clarify what it is really up to. Microsoft’s denial is more revealing that if it had simply pushed our the normal “we don’t comment on rumor or speculation” line that the company is used to saying. Read between the lines.

The news that Zune services will move into Windows Live backs up the reason Microsoft recently reorganized the Zune team structure. Microsoft split the hardware and software Zune teams into separate units. Microsoft’s reorg ultimately points to the demise of the Zune brand over time. Separately, WinRumors has learned that Microsoft is planning to make use of Nokia’s Ovi services and blend these into Windows Live. Andy Lees, President of Microsoft’s Mobile Communications Business, spoke at a financial analyst briefing during Mobile World Congress on Monday. Lees explained the Nokia deal. “It includes search revenue transfer, advertising revenue transfer, location-based services revenue transfer, royalty payments for software, and it includes joint marketing” said Lees.

Microsoft has been suspiciously quiet around Zune and Zune services over the past few months. The software giant’s Zune Video service gained over 50% more market share in 2010 compared to 2009, thanks to an international launch of the Zune Marketplace. Microsoft made Zune Video available in October to additional regions including Europe, Asia and Australia. Despite the expansion, Microsoft’s Zune services aren’t widely known outside of the United States. Microsoft’s marketing teams have spent little time and money on promoting Zune and the focus appears to be solely on Windows Phone. Whatever is planned for Zune, we should know more at MIX11 in April. Joe Belfiore, who is responsible for any forthcoming generations of Zune devices, is keynoting at the event.