Todd Bishop reports in the Seattle PI that Chris Payne, "the Microsoft Corp. executive who led the company's challenge to Google is leaving the company."
Four years ago, back in Feb 2003, Chris Payne pitched Bill Gates on building a Google-killer. That became Project Underdog and lead to a long, expensive, and largely unsuccessful effort to compete with Google.
See also Todd's weblog post which adds additional commentary and pointers to other coverage.
See also my Nov 2006 post, "Google dominates, MSN Search sinks".
Update: Danny Sullivan posts an excellent, detailed article on the history of Microsoft and search, writing that Microsoft now is entering its "third era" of search "because there are no longer any excuses to justify further losses."
I would recommend jumping down to Danny's subheading "2003: The 'Build Our Own' Decision & Christopher Payne" and reading down in the article from there.
Update: Danny Sullivan posts more details about how Microsoft created the opportunity for the rise of Google back in 1998-2002 using comments directly from "former Microsoft search chief" Bill Bliss. An obviously frustrated Bill writes, "I was always told 'Search is not core to our business ... AOL is the competitor to beat.'"
Update: Three weeks later, BusinessWeek writes "Where is Microsoft Search?", saying that "In February, 2005, Microsoft's MSN Search accounted for nearly 14% of all Web searches ... Just two years later, Microsoft's rebranded Windows Live Search has a 9.6% share" and that "Microsoft has already squandered much of the time it spent developing the search business .... [while] Google has performed near flawlessly."
Update: Eight months later, Microsoft Search GM Ken Moss -- Chris' right hand man on the search effort for the last five years -- is out too.