Microsoft appoints former Yahoo executive to head its online services group

Microsoft may be wary of bidding for Yahoo after its initial overtures were rejected, but it has no problem with tapping the latter's talent base. Following months of speculation, Microsoft Corp. on Thursday named a new executive to oversee its internet services business, as it seeks to gear up for a more formidable challenge to market leader Google Inc - former Yahoo executive Qi Lu, presently president of the online services group at Microsoft.

Lu will fill an important position that had been vacant since the departure in July of Kevin Johnson, who played a central role in Microsoft's failed attempt to buy Yahoo earlier this year. Johnson was also in charge of Microsoft's Windows operating system business. He left Microsoft in July to become chief executive of the networking technology maker Juniper Networks. (See: Juniper Networks announces ex-Microsoft executive Kevin Johnson as CEO)

With Lu's appointment, Microsoft chose an executive with deep technical knowledge over others with more advertising and media experience. Lu, a computer scientist with a Ph.D. and a former IBM researcher who holds 20 patents, left Yahoo in August after 10 years there. He most recently was an executive vice president overseeing engineering for two important areas: online search and advertising technology, at Yahoo.

''Dr. Lu's deep technical expertise, leadership capabilities and hard-working mentality are well known in the technology industry,'' Steven A Ballmer, Microsoft's CEO, said in a news release. Ballmer reiterated recently that Microsoft was no longer interested in acquiring Yahoo but said that it remained open to a search advertising partnership between the companies. He also said that there were no active talks between the companies. (See: Once spurned Microsoft plays hard-to-get after Yahoo offer)

In addition, Microsoft said that Brian McAndrews, who heads the company's advertiser and publisher solutions group and came aboard as part of its $6 billion acquisition of aQuantive Inc. last year, is leaving the company. McAndrews has been suggested as a potential candidate for the CEO job at Yahoo, which is seeking a replacement for outgoing chief Jerry Yang. (See: Founder Jerry Yang exits CEO's position at Yahoo)

Microsoft said McAndrews agreed to remain in a ''consultative capacity'' to Lu and Ballmer for the next several months. Scott Howe will oversee Microsoft's advertiser and publisher solutions business, previously headed by McAndrews.

Lu will be tasked with jump-starting a business that has traditionally been a money-loser for Microsoft, which regularly ranks third in terms of US online search market share, behind Google and Yahoo.

Microsoft held 8.5 per cent of the US online search market in October, according to data from comScore Inc., while Yahoo held 20.5 per cent and Google had 63.1 per cent.

In October, Microsoft reported a widened fiscal first-quarter loss of $480 million for its online services unit, on $770 million in revenue. By contrast, the company's two mainstay businesses, Windows and Office software, helped contribute more than $6 billion in profits during the quarter.

Yahoo has clung to its share of the search market and remained ahead of Microsoft, despite a broader business that's suffered and a steady stream of executive departures. In addition to Lu, other recent departures from Yahoo include network division executive vice president Jeff Weiner, and chief data officer Usama Fayyad.