Microsoft moves Hotmail into the trash to make way for a social media linked 'Outlook'

World's largest software company is renaming and rebranding its service

The update to the online email service will be the first in eight years, and will include new features for handling spam, mass emails and junk mail - which has for some time plagued Hotmail users.

It launched in 1996, was one of the first online email services and still has around 324 million users; but today Microsoft announced that it is unveiling a revamped, Facebook-friendly version of Hotmail, and is moving the old brand into the trash box.

Microsoft Corp, the world's largest software company is renaming and rebranding its service as 'Outlook'.

The move comes following increased competition from Google's Gmail, which is growing rapidly and now has around 31 per cent of the market, compared to 32 per cent for YahooMail and 36 per cent for market leader Hotmail, according to the latest comScore figures.

In a bid to recapture some of their users Microsoft is renaming the service 'Outlook', a brand familiar to workers who use Microsoft's Office email application.

The switch-over is expected to occur over the next few months.

The update to the online email service will be the first in eight years, and will include new features for handling spam, mass emails and junk mail - which has for some time plagued Hotmail users.

It will also contain a strong social media element and will allow users to connect to Skype.

Chris Jones, Microsoft's corporate vice president of Windows Live, said in a blog post: "We think the time is right to reimagine email. So today, we're introducing a preview of Outlook.com. We realized that we needed to take a bold step, break from the past and build you a brand new service from the ground up."

Central to the new version of Hotmail is the ability to link up with Facebook, Twitter, LinkedIn and Google+ - giving email an increased social function.

These new functions are bound to draw comparisons with Google's social networking project Google+, which links with users' email accounts.

The added social dimension to email acknowledges that email inboxes are being used by people increasingly to view social media updates.

Jones says: "Today's inbox is about more than just exchanging mail with the people you know -50% of the email in a typical inbox is newsletters and another 20% is social network updates. This is part of the reason our inboxes are overloaded and we often feel it's a chore to "do email."

The competitive edge between Google and Microsoft was illustrated in today's Outlook announcement as Microsoft emphasised that the new service will not display ads in personal discussions.

It also will not automatically link to social media accounts - another complaint that some users of Google+ have voiced.

Microsoft was today emphasising the ability of the new service to automatically filter material into separate sections of the inbox, saying that email had become a 'chore' as it was overloaded with material such as newsletters, package delivery notices, and social networking notifications.

Microsoft is currently offering the new service as a preview feature and has not announced an official release date, though it is expected to be in the next few months.

Users who make the switch to the new service will be able to keep the @hotmail, @msn or @live.com ending to their email addresses, but will also be able to add an @outlook.com account if they wish.