Qi Lu, a 10-year veteran who left Yahoo in July, was chosen over internal favourite Brian McAndrews, an online advertising and media expert, who will now leave the company.
Mr Lu replaces Kevin Johnson, who resigned from Microsoft four months ago after it abandoned its unsolicited bid for Yahoo. Mr Johnson, who had also been in charge of the Windows division, was a general business manager with a strong background in sales and marketing.
The preference for an engineer with no previous experience of broader business management highlighted the technology race that has developed between Microsoft and Google for dominance in the internet business, according to analysts.
“It shows they are certainly interested in emulating Google,” said Youssef Squali, an analyst at Jefferies in New York. He added, though, that the hire would not by itself boost Microsoft’s competitive position, since the company’s main hindrance in search has been a lack of audience and advertiser traffic, rather than weakness in its current generation of search and advertising technology.
The appointment also sparked a wave of speculation about whether it made Microsoft more or less likely to make a renewed attempt to buy Yahoo’s search business, or even to acquire the whole company.
Bringing in senior Yahoo technology talent such as Mr Lu and Sean Suchter, a top Yahoo search engineer who is due to join Microsoft later this month, could reduce the need for a deal. On the other hand, Mr Lu’s appointment was seen as one way to help smooth any future integration.
A former head of engineering for Yahoo’s search and advertising group, Mr Lu was lured away from a research career in 1998. The Chinese-born engineer had previously held research positions at IBM’s Almaden Research Center and Carnegie Mellon University.
The departure of Mr McAndrews, meanwhile, is “a big loss for Microsoft”, said Mr Squali. A former head of aQuantive, the online advertising group that Microsoft bought for $6bn two years ago, Mr McAndrews had “relationships on the [advertising] agency and creative side that no one else at Microsoft has”, he added.
Microsoft named another former aQuantive executive, Scott Howe, to replace Mr McAndrews.