• by Laurie Sullivan  @lauriesullivan, May 19, 2009

Microsoft plans to publicly demonstrate a new search engine for the first time, as well as announce launch plans at next week's D: All Things Digital conference in Carlsbad, Calif., confirmed a source in the know.

The search engine's debut, first reported by The Wall Street Journal, should put Microsoft in a better position to compete for advertising dollars against others in the space. Code-named Kumo, the search engine is expected to position Microsoft better against Google and new computational knowledge engine WolframAlpha, which has received a lot of attention in the past few weeks.

"Microsoft is a distant third and dropping," says Charlene Li, Altimeter Group founder and co-author of "Groundswell." "They have struggled to gain traction. There are so many users that rely on other Microsoft products such as Hotmail. But instead of using a Microsoft browser, they open another engine's like Google or Yahoo."

Li says this is an opportunity for Microsoft to win back people "already in the Microsoft orbit."

Americans conducted 14.8 billion searches in April -- up 3% from March, according to comScore. The research firm reported that Google led the U.S. search market with 64.2% of the searches, followed by Yahoo at 20.4%, and Microsoft at 8.2%.

A Microsoft spokeswoman said the company has "nothing to share at this time."