There's a new wrinkle in the interplay between Microsoft and Yahoo: Redmond has hired Qi Lu to head up its online operations. Lu, who was a top exec in Yahoo's search division for a decade, left the company in August. His departure occurred right around the time Microsoft gave up its acquisition bid. Yahoo then quickly struck a search deal with Google, which also later fell through.
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Microsoft (Nasdaq: MSFT) has tapped Qi Lu, a former Yahoo (Nasdaq: YHOO) Search executive, to run its Internet unit.
Lu, 47, left Yahoo in August after 10 years; he most recently served as vice president of engineering for the search and advertising technology group.
At Microsoft, he will become the president of the online services group, and he will report to CEO Steve Ballmer. Lu's first day at Microsoft is Jan. 5, 2009.
Lu brings an impressive array of accomplishments to Microsoft, which has struggled to maintain what little market share it has in the search advertising sector.
He has a doctorate in computer science from Carnegie Mellon University and is a former IBM (NYSE: IBM) researcher who holds 20 U.S. patents.
"His résumé speaks for itself," Brendan Barnicle, an equity analyst at Pacific Crest Securities, told the E-Commerce Times.
Ballmer said he is "tremendously excited to welcome Qi to Microsoft. Dr. Lu's deep technical expertise, leadership capabilities and hard-working mentality are well known in the technology industry."
However, it's unclear whether bringing in a former Yahoo search executive will solve Microsoft's problems in the online search sector.
"I'm not sure having someone from Yahoo will be a silver bullet for turning around Microsoft's search product," said Pacific Crest's Barnicle, "because we're not convinced that Yahoo has done such a great job itself in search. If it had been a top search guy from Google (Nasdaq: GOOG), that would be something to get excited about."
In order to make a significant impact on the company's flagging Internet search initiatives, it's imperative that Lu get strong support 
from Ballmer and other top Microsoft managers, said Barnicle. "It's gotten easier to do that lately, because Microsoft has gotten much more serious about winning in search."
Lu's hire has renewed speculation that Microsoft is contemplating an acquisition of Yahoo or its search business.
However, Barnicle said Lu's hire doesn't have anything to do with any acquisition plans Microsoft may or may not have in the works.
"You have to remember that the discussion about search at Microsoft has been ongoing for quite a while," he said. "The Yahoo deal was really contemplated about a year ago, and the dynamics around Yahoo and search have changed dramatically. It's not clear at all that Microsoft even needs Yahoo anymore, let alone a search deal."
Barnicle has a buy rating on Microsoft's stock and a 12-month price target of US$27 per share. Microsoft stock was up 2.35 percent at $19.57 in late-day trading on Friday.
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