Microsoft picks up Hotmail

Summary:Microsoft Corp. has acquired the free E-mail service Hotmail for an undisclosed sum.

Microsoft Corp. has acquired the free E-mail service Hotmail for an undisclosed sum.

In the aftermath of the acquisition, the Hotmail service will become a "component" of the Microsoft Network, allowing MSN users to check their E-mail from a Hotmail account. The buyout also will allow Hotmail users see the number of E-mails they've received when they visit the MSN.com site. In addition, both companies will cross promote the other's service and integrate them more fully in the future.

Rumors about a possible acquisition surfaced earlier this month, with some sources putting a price tag on the deal between $300 million and $500 million. Microsoft did not release financial details.

Shirish Nadkarni, MSN director of product planning, said Microsoft chose Hotmail because it's the only E-mail company that's proven itself reliable on a large scale.

"They've grown purely through word of mouth," Nadkami said. "That's the best testimony. Their own users are recommending it to other users."

Hotmail allows users to access E-mail over the Web from any computer through an account with the service. Supported by advertising, the free service has attracted more than nine million subscribers, rivaling America Online Inc. Analysts said earlier this month that the quest to grab the attention of Internet users was what led to Microsoft's interest in the company, as well as to deals like Yahoo! Inc.'s acquisition of Four11 Corp. for $94 million.

Web surfers should see changes resulting from the merger sometime in 1998, Nadkami said, though he declined to give a more specific date.

Hotmail vice president of sales and marketing Steve Douty said the two companies began talking about a possible deal allowing Microsoft to offer free Web-based E-mail using Hotmail technology a few months ago.

"As things moved along, we discovered a lot of similarities about our vision for the future of the service and their vision for the future of their service," he said. "We also learned that we had a lot of complementary technological capabilities and we were a good fit culturally. It made more sense to talk in terms of merger, as opposed to other type of business deal."

Besides the addition of free E-mail to the MSNservice, the two companies will work toward adding Hotmail's so-called back office functions to Microsoft's Windows NT operating system and Exchange messaging software, he said.

"The back end is what does the heavy lifting and the number crunching. It allows to provide E-mail very quickly," he said. "Over time, we'll migrate the underlying technology... to provide a cost effective and scalable system."

Hotmail, which will operate as a wholly-owned subsidiary of Microsoft, will continue to support its current members, Douty said.

Employees of Hotmail will be unaffected, Microsoft said. They will remain at their Sunnyvale, Calif. headquarters, but they will now report to Laura Jennings, vice president of MSN. Microsoft Corp. has acquired the free E-mail service Hotmail for an undisclosed sum.

In the aftermath of the acquisition, the Hotmail service will become a "component" of the Microsoft Network, allowing MSN users to check their E-mail from a Hotmail account. The buyout also will allow Hotmail users see the number of E-mails they've received when they visit the MSN.com site. In addition, both companies will cross promote the other's service and integrate them more fully in the future.

Rumors about a possible acquisition surfaced earlier this month, with some sources putting a price tag on the deal between $300 million and $500 million. Microsoft did not release financial details.

Shirish Nadkarni, MSN director of product planning, said Microsoft chose Hotmail because it's the only E-mail company that's proven itself reliable on a large scale.

"They've grown purely through word of mouth," Nadkami said. "That's the best testimony. Their own users are recommending it to other users."

Hotmail allows users to access E-mail over the Web from any computer through an account with the service. Supported by advertising, the free service has attracted more than nine million subscribers, rivaling America Online Inc. Analysts said earlier this month that the quest to grab the attention of Internet users was what led to Microsoft's interest in the company, as well as to deals like Yahoo! Inc.'s acquisition of Four11 Corp. for $94 million.

Web surfers should see changes resulting from the merger sometime in 1998, Nadkami said, though he declined to give a more specific date.

Hotmail vice president of sales and marketing Steve Douty said the two companies began talking about a possible deal allowing Microsoft to offer free Web-based E-mail using Hotmail technology a few months ago.

"As things moved along, we discovered a lot of similarities about our vision for the future of the service and their vision for the future of their service," he said. "We also learned that we had a lot of complementary technological capabilities and we were a good fit culturally. It made more sense to talk in terms of merger, as opposed to other type of business deal."

Besides the addition of free E-mail to the MSNservice, the two companies will work toward adding Hotmail's so-called back office functions to Microsoft's Windows NT operating system and Exchange messaging software, he said.

"The back end is what does the heavy lifting and the number crunching. It allows to provide E-mail very quickly," he said. "Over time, we'll migrate the underlying technology... to provide a cost effective and scalable system."

Hotmail, which will operate as a wholly-owned subsidiary of Microsoft, will continue to support its current members, Douty said.

Employees of Hotmail will be unaffected, Microsoft said. They will remain at their Sunnyvale, Calif. headquarters, but they will now report to Laura Jennings, vice president of MSN.

Topics: Microsoft, Windows

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