Candidates for the job who currently work at Microsoft include SVP Yusuf Mehdi, once Microsoft's online chief; Brian McAndrews, the former CEO of Microsoft-acquired aQuantive; SVP Satya Nadella, who runs search engineering, among other responsibilities; and Bill Gates's replacement as chief software architect, Ray Ozzie.

"Yusuf is not an operator and Satya is a possibility but would be a stretch," a source tell us. "I would bet on Brian McAndrews. But McAndrews might not want it as he made serious bank with the sale of aQuantive and may not want to do more than he has to finish his earn out. I mean, what’s the marginal upside for him?"

As for Ozzie, Kara Swisher quotes all kinds of Microsoft developers who hope he'd take the job,but another source tells us: "I think he's got the gig he wants: basically, being a visionary. And he's great at it."

One problem with Ozzie, says our source: "Only thing I've heard so far is [the candidates are] not internal." So scratch Ozzie and the rest off the list!

"My guess is they'd want to poach from Google, for appearance's sake," says our source. He suggested we take a look at ex-Microsoft employee, Mark Lucovsky — head of Google's search APIs. The problem with Lucovsky is that Microsoft CEO Steve Ballmer might not want to take him back — he reportedly threw a chair when he heard Lucovsky was leaving Microsoft for Google in 2005.

Swisher's Microsoft sources also nominated former Yahoo COO Dan Rosensweig for the job, but a source says: "Dan would never do it given loyalty to Yahoo."

So who's it going to be? The people we talked to gave us the usual boring non-answers — "I imagine Microsoft might take a little time to really look around. There is no massive rush." So we'll suggest another scenario: Why doesn't Microsoft pull a Sandberg?

Sheryl Sandberg was a relatively obscure VP at Google, but she had an important job — overseeing the automated systems that pulled in Google's billions of dollars in advertising revenues.

Our guess: Someone from AOL, possibly Lynda Clarizio, boss of AOL's Platform-A advertising division. Microsoft seems eager to buy AOL —AOL dealmakers met with Microsoft in Seattle last week, and yesterday, AOL started cutting costs in an effort to pretty itself up for a sale — and Clarizio would probably be the top executive to come over in the deal.

AOL CEO Randy Falco wants to get a Hollywood job at Time Warner after putting in his time at AOL. His henchman, Ron Grant, has lost favor of late. Is Clarizio too salesy for the top online job at Microsoft? Probably, but then, there is evidence Microsoft CEO Steve Ballmer might not mind.

(Photo by adpowers)

Kevin Johnson, president of Microsoft's Platform and Services Division, which includes Windows and MSN, is the most likely candidate. But like Ballmer, he has a sales background, and he, too, was involved in the failed Yahoo bid. Chief operating officer Kevin Turner is despised within the company, and despite previously being Wal-Mart's CIO, he's not seen as having the right kind of technology background. Ray Ozzie, a respected innovator, has yet to introduce any game-changing new products. Robbie Bach heads up the division that houses the Xbox, one of Microsoft's few hits outside Windows and Office — but he seems too disconnected from Microsoft's core businesses. The rest? A muddle of undistinguished Microsoft lifers and recently imported suits.

5:41 a.m.: Johnson is discussing operational "redundancies." Translation: When it comes to layoffs, Yahoo ain't seen nothing yet.
5:42 a.m.: Ray Ozzie, Microsoft's CTO, is giving a high-minded speech about how the Web has "transformed society." Derides search as "10 blue links," says the Web has evolved to "social media." Which would sound less like sour grapes if Microsoft were successful in either field. He ends with reference to "magic of software."
5:45 a.m. Microsoft CFO Chris Liddell says the company hopes to close the deal in the second half of the year. For Yahoos, that means at least 5, up to 11 months of uncertainty. Should be a field day for Valley recruiters.
5:47 a.m. Questions are starting. Why buy Yahoo, since you already bought aQuantive? Answer: Scale.
5:49 a.m. Question: Revenue synergies have been elusive in software deals. Kevin Johnson fields this one. Answer: Revenues are from advertising, not traditional software. "Scale economics" drive yield in both search and display advertising.
5:51 a.m. Ballmer: "We've been losing money. Our plan is not to lose money in the future."
5:53 a.m. Johnson: Advertisers have been giving Microsoft "unsolicited" praise for the offer. They want a No. 2 in the market, he says.
5:55 a.m. Microsoft-Yahoo can be "more efficient" with engineers working on search. Translation: More layoffs!
5:57 a.m. Question: Why not just spend more on R&D? Answer: Time to market.
5:58 a.m. Question: Why not wait until it could be a friendly offer? Answer: "We look forward to the dialogue."
5:59 a.m. Question: What happens to the MSN and Live brands? Johnson: "We love the Yahoo brand." Microsoft will "go through a process" to determine what to keep. Ballmer: "There will be a Windows Live. There will be an Office Live.... Yahoo those are all powerful brands." Sounds like MSN might be dropped.

• Game rating board ESA sues gaming blog Kotaku (a Valleywag brother blog) for writing about the best. gaming t-shirt. ever (pictured). [Kotaku]
• The 49ers and A's both head south into Silicon Valley. [Contra Costa Times]
• Ray Ozzie says he's stepping into big shoes by replacing Microsoft president Bill Gates. YOU DON'T SAY, RAY. [Guardian]
• Fox Interactive steals http://myspace.com/bones from the band Bones, gives it to the Fox show Bones. Thankfully, the site replaces the band's page after an outcry, realizing what a stupid, stupid idea this was. Does MySpace realize they have users? [Techdirt]
• Top dogs from blog platform company Six Apart gab for a half hour about the new version of Vox and the Web 2.0 Summit. [Six Apart]

Famed Vic G. el google goneo.

It's the calm before the storm. That's dead obvious.

Vic's following Ted Hase, Martin Taylor and Mark Zbikowski. Weird ones there.

And it's been way more than just natural-selection to-and-fro, it's been key people in key positions, I mean, this just adds to all the Kai-Fu Lee, Mark Lucovsky, Adam Bosworths turmoil. Breeding ground for conspiracy theories, but you need not go crazy conspiracy. Just look around at normal happenings...

After the jump, Chris gets insidery.

Another shake-up looming with a rumored heavy RIF, with the WinFS fallout, the Warhol "warporware" and the WGA chaos, with morale low and new stack rank chaos, and Vista slips (with Philip Su telling all), with Dynamics not quite so dynamic, with the stock in a two year hibernation thanks to Gates's long-term pull-out, with the political back-stabbing games anew, with everyone (even Grandma investors) unhappy with Ballmer's leadership or "spend strategy." All the while, Ray Ozzie is dazzled by Web 2.0 pixie-dust and "Web Advertising" revenues, with Craig Mundie playing academia chess-game tiddlywinks.

With Adobe, Symtantec, EU and pretty soon half the world sending more lawyers in. (Bought their way out of the lawsuit hole, only to fall back in). And now with the Walmartty Kevin Turner spit and shine. Office reorg's still sinking in, with all other groups merely treading water. With the chief "blogger" that anyone actually reads being the anonymous Mini-Microsoft. All while Key Evangelists short-sell before the crash.

These tea leaves aren't much hard to read.

Even if you, like me, have no idea what WGA and "heavy RIF" are, hopefully Chris was still able to stir up some vague fear in your heart. [UPDATE: Chris explains some acronyms:]

RIF = Reduction in Force. Meaning, yes, Microsoft layoffs. Gates is no longer the protector for money-losing rat-holes. Mundie and Ozzie Ax of sorts. I hear 7,000 is the target. Mini-Microsoft may get his wish. Yet Ballmer's preaching a hire pitch, so layoffs while hires. Typical. Foot on brake and gas at same time.

WGA = Microsoft anti-piracy thing that morphed spyware. Biggggggggg fallout as it mistakenly reported a big swash of Procter & Gamble clients as being pirated. And some row with the Air Force as it did the same thing there, and they are freaking over the report back procedure something. Supposed to be blanked out for corporate keys, but individuals installed it themselves and it all invaded the network; havoc is an understatement. The inside scoop.

Earlier: Quick, let's make chair-throwing jokes [Valleywag]

Privateye strikes again. Ha! Ha! Jokes about Microsoft CTO Ray Ozzie are the best!

Mixed or burnt? [privateye on Flickr]
Original photo: DSC02003 [grex on Flickr]