Microsoft snags former Yahoo search-technology whiz to lead online division

Microsoft has picked a top search technologist and former senior Yahoo executive to run the struggling division that battles Google most directly.

Qi Lu, a 47-year-old computer scientist who left Yahoo in August after a decade there, will be president of the Online Services Group, a high-profile position vacant since July.

It's another in a string of significant Microsoft hires from Yahoo, which the Redmond company was willing to buy for $47.5 billion earlier this year in a bid to quickly gain ground on Google in the online search and advertising businesses.

Lu, who was executive vice president of engineering at Yahoo's Search and Advertising Technology Group, takes the helm Jan. 5 of a major division that includes Microsoft's efforts in Internet search, digital advertising and MSN content.

"It's an unusually technical hire for that group," said Matt Rosoff, analyst at Directions on Microsoft. "The last few leaders have been business leaders from a sales and marketing background."

Kevin Johnson, who oversaw this business before leaving Microsoft in September, earlier headed worldwide sales at the company.

The selection of a technical leader like Lu underscores Microsoft's focus on "building a solid first-party search and advertising platform," Rosoff said.

In a statement, Microsoft Chief Executive Steve Ballmer praised Lu's "deep technical expertise, leadership capabilities and hardworking mentality."

At the same time, Microsoft announced the departure of Brian McAndrews, a senior vice president who joined the company from aQuantive, the Seattle digital-ad company Microsoft acquired in 2007.

McAndrews, who comes from a business and media background, was reportedly an internal candidate for the online job.

Observers differed on what the move indicates about Microsoft's appetite for Yahoo's search business. Some think it makes an ideal precursor to a deal, while others say it looks like Microsoft is focusing on its own efforts.

Ballmer has been clear that Microsoft is no longer interested in buying all of Yahoo, whose stock closed Thursday at the bargain basement price of $11.05. But the chief executive said as recently as Nov. 19 that a collaboration on Internet search remained "an interesting possibility."

Sid Parakh, a McAdams Wright Ragen analyst, said the collection of former Yahoo search talent at Microsoft could suggest the company has shifted back to a strategy of build rather than buy.

"Google is the technology leader in the industry, and to catch up with them there is clearly a lot of technology development that Microsoft is undertaking at this point," he said.

In October, Google had 63.1 percent of the U.S. search market. Yahoo had 20.5 percent and Microsoft had 8.5 percent, according to comScore.

A primary reason Microsoft sought to acquire Yahoo was to quickly gain a significant chunk of search-market share, but both companies have seen their share deteriorate as Google's continues to grow.

Parakh speculated Microsoft may be planning to chip away at Google over a longer period of time without having to spend several billion dollars on Yahoo's search business.

The addition of Lu could help attract even more former Yahoo employees.

Yahoo recognized Lu as a magnet for top computer scientists. "Qi has attracted some of the best and brightest talent, amassing a world-class team of search engineers," Yahoo Chief Technology Officer Farzad Nazem said in a news release in 2006, when Lu was promoted.

On the other hand, if Microsoft were to pursue a search deal, it could have no better guide than Lu.

"It appears from this appointment that Microsoft is setting the table for a partnership or acquisition of Yahoo's search business," Mark Simon, vice president of industry relations at Didit, a New York search-engine marketing firm, said via e-mail.

"Qi Lu could be the key component in the successful integration of a platform that he knows blindfolded."

At Microsoft, Lu will oversee several groups under the broad Online Services umbrella, one of two divisions created in July from the 14,000-employee Platforms and Services Division. The other is the hugely profitable Windows group.

The revamp occurred when longtime division President Kevin Johnson abruptly left to become Juniper Networks' CEO.

Groups reporting to Lu include:

• Advertiser and Publisher Solutions, previously run by McAndrews and now led by Scott Howe, another former aQuantive executive, who was promoted to corporate vice president;

• Online Audience, led by Yusuf Mehdi, a senior vice president who has been an active digital-deal maker and strategist at Microsoft;

• Online Services Research and Development, led by Senior Vice President Satya Nadella.

• Online Services Finance, led by Rik van der Kooi, who was promoted to corporate vice president.

Yahoo, searching for a new CEO to replace co-founder Jerry Yang and regrouping after the disintegration of an advertising deal with Google, "remains committed to algorithmic and sponsored search, with a strong search-technology team that includes some of the industry's brightest engineers," spokeswoman Kim Rubey said via e-mail.

She said Lu "was a valued Yahoo who made important contributions during his time with us. We wish him every success in his career."