Microsoft Taps Yahoo! Exec for Online Group

The alliance fell apart last month when Google backed out to avoid an antitrust battle with the Justice Department.

The move to hire Lu is a new twist in Microsoft's winding pursuit of Google's online advertising success, which culminated with a $47.5 billion bid to buy Yahoo! this spring. After Yahoo! spurned the offer, Microsoft CEO Steve Ballmer -- Lu's new boss -- attempted to buy Yahoo!'s search operations a la carte for $1 billion. Yahoo! again declined, but Ballmer has repeatedly said he remains interested in some kind of tie-up.

Hiring Lu "shows that Microsoft is doubling down on search again," said Matt Rosoff, an analyst for the independent research group Directions on Microsoft.

Shares of Yahoo! rose 3 cents in extended trading after sinking 3.9% to close at $11.05. Microsoft's stock slipped 9 cents after hours, following a regular session loss of 76 cents, or 3.8%, to close at $19.11.