Microsoft will preview a new version of its Internet search engine code-named Kumo at the D: All Things Digital conference in Carlsbad, Calif., the week of May 25.

Kumo will organize search results in an efficient way, grouping them into subcategories, and represents an upgrade from Microsoft's Live Search. For example, if you do a search of "Audi S8," it will feed back results categorized under "Audi S8 Parts," "Used Audi S8," "Top images for Audi S8" and "Top video for Audi S8." In theory, this will result in faster searches, sparing users from having to sort through pages of ungrouped hyperlinks. Microsoft has been testing the search engine internally for months, according to several different published reports.

Microsoft finds itself locked in a pitched battle against Google for the U.S. core search market. A battle that, so far, Google is winning. In 2008, Microsoft attempted a $47.5 billion hostile buyout of Yahoo, which was denied by Yahoo co-founder Jerry Yang at massive cost to the company's stock.

But with both companies lagging behind Google in search—a report by research company ComScore has Yahoo claiming 20.4 percent of the market in April and Microsoft 8.2 percent, in contrast to Google's 64.2 percent—talks have restarted over a possible Microsoft-Yahoo search and display advertising deal.

Both Yahoo CEO Carol Bartz and Microsoft CEO Steve Ballmer have refused to publicly comment on any such talks, although Ballmer suggested earlier in May that a Yahoo acquisition would have been "valuable."

Microsoft and Yahoo are also wrestling against the headwinds of a global recession that has eaten into their revenue and profits. In an April 21 earnings call, Bartz announced that Yahoo would cut 5 percent of its worldwide work force, as the company reported first-quarter revenues of $1.58 billion, down 13 percent from the same quarter in 2008.

In the same quarter, Microsoft posted its first-ever quarterly revenue decline, with revenues of $13.65 billion representing a 6.5 percent year-over-year decrease.

Even if Microsoft and Yahoo were to join forces, however, the gross market-share numbers would not be enough to overcome Google's lead in search. Aware of its vulnerability to potential antitrust suits as it maintains its lead, Google recently launched a campaign to highlight what it views as its competition-friendly openness.