Microsoft Hotmail upgrade targets Gmail and Yahoo

Microsoft is refreshing its free e-mail service Hotmail in an attempt to give it an edge over rival offerings from Yahoo and Google.

The update will mean documents sent via Hotmail can be viewed and edited via web versions of its Office software.

Other changes are designed to improve security by filtering spam and spotting phishing attacks.

Hotmail is the world's biggest e-mail provider but faces increased competition, particulary in the US.

Figures from research firm Comscore show that Yahoo mail still dominates the free e-mail market in the US, with Microsoft in second place. Google's Gmail service is quickly adding to its market share.

Walt Harp, one of the directors at Windows Live, said many of the changes were designed to help people get to grips with the huge amount of information flowing through inboxes.

"That's where you manage your personal life, through your e-mail accounts," he said.

Updates from social networks, videos and snaps from friends, shipping details for goods ordered via the web all pass through e-mail inboxes, he said.

For instance, he said, one-click filters will let people see messages from one source such as Facebook or web retailer Amazon. Microsoft is also introducing the ability to sort e-mails by conversation rather than individual messages.

The feature is already available in Gmail.

The refresh includes tools to quickly get to work on the extras, such as web links, pictures and videos, included in messages.

The Active View system will preview pictures at the top of a browser window rather than send users to a separate page or service. Microsoft said Flickr, YouTube and the US Postal Service wil be among its partners using this feature.

Most of the elements of the refresh will be available after the summer update. However, said Mr Harp, the tighter connection to its latest version of Office - launched last week - will not happen until the autumn of 2010.

The launch of Office 2010 was seen by many analysts as a direct response to Google, which offers its own suite of Office software - known as Docs - for free online.

Windows Live Hotmail is currently the world's biggest e-mail provider. It claims to have more than 360 million members and it handles more than eight billion messages per day.