Microsoft Corporation announced Wednesday that it was buying Hotmail, the free Web-based email service. Microsoft will use the service to offer free email from the Microsoft Network (MSN).

"Hotmail has been a Web mail pioneer," said Laura Jennings, VP of MSN. "Our goal is to combine the benefits of Hotmail with Microsoft services and technology to provide consumers the best combination of free and premium email services."

Hotmail will continue to operate out of Sunnyvale, California as a wholly owned subsidiary of Microsoft.

"We look forward to working with Microsoft on ways we can expand free email services on the Web and bring new features to consumers even more quickly," said Sabeer Bhatia, Hotmail's CEO.