Swisher, citing "several sources inside and outside the company," reports that Lu's "appointment could be announced by Microsoft as early as next Monday."

He would fill the vacancy created when Kevin Johnson, president of Microsoft's platforms and services division, departed in July. Microsoft split the 14,000 employee division in to two separate groups: One includes Windows, the desktop operating system, and Windows Live, a suite of online applications.

The other group is Online Services, including the company's advertising business and Internet-search efforts. This is the division Lu would reportedly head. The segment was the only one that reported a loss -- $1.2 billion -- in Microsoft's 2008 fiscal year, and the company announced plans to increase its investment here, signaling more losses are likely.

Microsoft CEO Steve Ballmer has been overseeing Online Services directly since Johnson's departure. Three top executives head various aspects of the business: Satya Nadella, Senior Vice President, Search, Portal & Advertising Platform Group; Brian McAndrews, Senior Vice President, Advertiser & Publisher Solutions Group; and Yusuff Mehdi, Senior Vice President, Online Audience Business.

Lu left Yahoo in July. He was promoted to his post as search engineering boss in 2006. More background from this Yahoo press release at the time:

"Previously, Lu was the vice president of engineering at Yahoo!, responsible for the technology development of Yahoo!'s Search and Marketplace business unit which includes the company's search, e-commerce, and local listings of businesses and products.

"Prior to joining Yahoo! in 1998, Lu was a Research Staff Member at IBM Almaden Research Center. Before that, Lu worked at Carnegie Mellon University as a Research Associate, and at Fudan University in China as a faculty member.

"Lu received his B.S. and M.S. in computer science from Fudan University and his Ph.D. in computer science from Carnegie Mellon University."

As Swisher notes, Lu's experience leans more toward the technical; he "does not have advertising sales and media experience that will be a big part of his purview at Microsoft." As such, he may be "'paired' with another executive at Microsoft with more general business experience." Names she floated include Ballmer himself and McAndrews, who was CEO of aQuantive, the digital ad powerhouse Microsoft acquired in 2007.

She also parses the strategic implications of hiring Lu:

"In picking a serious tech-oriented executive over a more media-centric one ... [Ballmer] is clearly staking out an even more head-on fight with Google.

"But since a lot of Microsoft's future rests on winning in the search and search-advertising space and trying to catch up with its techtastic Silicon Valley archrival from way back in the race, Lu is also well suited for the position. ...

"Importantly, Lu will definitely be a draw in bringing in top talent to Microsoft, especially from Yahoo."

That's already happening. Last month, Microsoft took Sean Suchter, former Yahoo vice president of search technology.

But while poaching Yahoo's personnel is important, it's not like Microsoft doesn't have its own strong people working on search now. One of the big reasons to buy or partner with Yahoo search was (is?) to quickly gain market share, making Microsoft/Yahoo search a must-buy and a counterweight against Google. Combined, Microsoft and Yahoo had 29 percent of the U.S. search market in October, compared with 63.1 percent for Google.

Yahoo executives bring brain power and influence, but they don't necessarily bring search traffic.