Microsoft Buying PC-Search Firm

Microsoft Corp. is expected to announce today that it has acquired Lookout Inc., a Palo Alto start-up whose software figures into Microsoft’s ambitions to make searching for information on personal computers as easy as searching the Web.

The two-employee company, which sells a program that hunts for specific words in e-mail, documents and other files on the PC, will be folded into Microsoft’s MSN online service. Terms of the deal were not disclosed.

Microsoft is investing heavily to develop an Internet search engine to compete against those offered by Google Inc. and Yahoo Inc. But Google and Yahoo also are moving into Microsoft’s turf; both companies have plans to offer search engines that can find information on the PC desktop that Microsoft dominates with its ubiquitous Windows operating system.

“Microsoft wants to own the desktop, and there’s increasing demand for desktop search,” said Sue Feldman, vice president of content technologies for the research firm IDC.

Lookout’s software installs a search box in Microsoft’s Outlook e-mail program that lets users find things anywhere on the computer desktop. But analysts predict that the Redmond, Wash.-based company will move that search box into its Internet Explorer browser, letting users search the Web and the contents of their PCs simultaneously.

“The browser is where people want to live,” Feldman said. “They don’t want to keep moving from one application to another.”

Lisa Gurry, an MSN group product manager, was coy about Microsoft’s plans for Lookout.

“It is likely the technology will be delivered via MSN,” she said.

The acquisition represents an unlikely alliance for Lookout co-founders Mike Belshe and Eric Hahn. The pair previously worked for Netscape Communications Corp., the browser company that popularized Web surfing and was later crushed by Microsoft tactics that a federal judge found violated antitrust laws.

Belshe will become an MSN Search employee, while Hahn will not, Microsoft said.