TC says yes:
Microsoft has gathered a team of twenty or more “rock star” developers who’ve been tasked at building their next generation search engine, a source has told us. The team, which supposedly came together recently, is based at Microsoft’s Silicon Valley headquarters in Mountain View.
We have few details on their approach to the product, other than hearing that it is definitely a “horizontal” engine (so, it’s not limited to a specific vertical like images), and is “very cool.”