Microsoft Acquires Hotmail to Add to MSN

ENT, Feb 4, 1998 by Thomas Sullivan

"Microsoft chose Hotmail primarily because we believe it offers the most feature-rich Web-based e-mail service," says Nadkarni. "In addition, Hotmail is the only browser-based e-mail service that's proven itself by gaining more than 9 million subscribers."

Current Hotmail users aren't likely to see much difference in their service. "I don't think it means much for Hotmail users; the service will still have all the same features, and users will keep the same address," says Mark Meridian, group director, consumer content, Jupiter Communications (New York, N.Y.), an industry analysis firm. Meridian adds, though, that Hotmail may at some point lose the Hotmail brand, so the addresses could change eventually.

While changes to the current system may be slight, Hotmail claims the acquisition will enhance its service in the future. "Our merger with Microsoft will make Hotmail a more feature-rich service by accelerating product development cycle times with the addition of key Microsoft resources," commented Sabeer Bhatia, Hotmail president and CEO, in a letter to all Hotmail members.

MSN users, on the other hand, now have access to a free Web-based e-mail service via msn.com. "One of the benefits of a Web-based e-mail service is that it can be accessed from any device with a Web browser," says Microsoft's Nadkarni. In other words, Hotmail is available via almost any PC, an assortment of hand-held devices, Web TV or Internet kiosks. MSN users will now be able to access their MSN e-mail accounts via Hotmail, from most Web browsers. "Even if you're already using a different e-mail service, Hotmail can be valuable when you're on the road," says Microsoft's Nadkarni.

Even though Hotmail will be integrated into MSN, it will operate as a wholly owned subsidiary. All of Hotmail's policies and terms of service will remain in place. "The basic Hotmail service will always be free. While we will offer premium services for a modest charge from time to time, Hotmail e-mail remains free, just as it has always been," says Hotmail's Bhatia.

Another advantage to Hotmail is the wide variety of browsers it supports. Users can access the Web site with almost any browser, and Microsoft's new role in Hotmail isn't likely to change this. "Given that Hotmail has a pretty extensive subscriber base, and many of these subscribers use Netscape, it would defeat the purpose of the acquisition for Microsoft to phase out Navigator or any other browser, or make Hotmail work exclusively with Internet Explorer," explains Jupiter Communications' Meridian.