The hiring of Lu follows Microsoft's successful recruitment of Sean Suchter, a former vice president of search technology at Yahoo.
The two Yahoo hires suggest another way for Microsoft to consummate a search advertising deal with Yahoo -- by acquiring Yahoo's key technical personnel.
While Microsoft's CEO Steve Ballmer told shareholders last month that Microsoft's talks to acquire all of Yahoo were "done," he suggested that a future collaboration on search might still be possible.
Ballmer has typically emphasized that Microsoft's search, advertising and online services are critical to the company's long-term strategy. He stepped back from efforts to acquire all of Yahoo in May, and Microsoft has continued to trail No. 1 Google and No. 2 Yahoo in online search-use stats.
Lu will play a key role in Microsoft's search and online advertising efforts, according to Ballmer.
"Dr. Lu's deep technical expertise, leadership capabilities and hard-working mentality are well-known in the technology industry, and Microsoft will benefit from his addition to our executive management team," said Ballmer in a released statement.
A Wall Street Journal blog has questioned Lu's advertising expertise for the job. Moreover, a Microsoft executive with that ad background will be leaving the company. Brian McAndrews has decided to "transition out of Microsoft" in the months ahead, according to the company's announcement.
As the former CEO of online ad platform company aQuantive and senior vice president of Microsoft's Advertiser & Publisher Solutions Group, McAndrews was credited with building "a world-class business for advertisers and publishers," according to Microsoft's statement.
In addition to losing personnel to Microsoft, Yahoo is currently looking to replace its departing CEO Jerry Yang. Following flat third-quarter financial results, Yahoo also announced a plan to lay off as many as 1,500 employees.
Microsoft, for its part, has so far weathered the storm of a faltering economy. However, a Bloomberg.com article on Friday warned that all of the software giant's five divisions may miss their sales figures in the quarter.
Microsoft's stock closed this week at $19.87 per share -- a relatively low mark compared with its 52-week range of $17.50 to $36.72.
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