December 5, 1997 11:00 AM PST

Hotmail, Microsoft talk deals

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Hotmail has held discussions with Microsoft about using its free email technology on the giant's Web sites, sources familiar with the talks confirmed today.

Another possibility is an equity investment in Hotmail by Microsoft.

But sources cautioned that Hotmail's talks are with "numerous companies, including Microsoft," and said there is no assurance that a deal would be concluded. A realistic time frame for wrapping up any deal would be in the next month or two, the sources said.

Hotmail has become a hot commodity, especially since the buyout of free email provider Four11 by Yahoo in October. Both companies are backed by the Draper Fisher Jurvetson venture capital firm.

Offering free, Web-based email has become a trend among popular Web sites. Not only Yahoo, but also Excite and Pathfinder are among those offering free email. As previously reported, America Online soon is expected to launch Web-based email, but only for its subscribers to send and retrieve AOL email from a Web browser (without AOL software).

Hotmail, founded in 1995, says it has more than 8.5 million subscribers.

Despite its benefits, free email has some drawbacks, Netizens complain. In order to be free, it is supported by Web advertising. It often is used by spammers, because it is so easy to sign up for and use. Free email companies are fighting back with antispamming policies.

Business Week also reported today that talks between Microsoft and Hotmail are under way. Microsoft and Hotmail declined to comment.

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