The company's own research found that between 40 and 98 percent of messages sent to users of Hotmail, now being rebranded as Windows Live Hotmail, are unsolicited or fraudulent in nature.
The findings will disappoint Microsoft chairman Bill Gates, who predicted at the 2004 Davos World Economic Forum that spam would be "eliminated" within two years.
Instead, quarter-on-quarter spam levels hit a two-year high of 76.3 percent in the first three months of 2007, according to MessageLabs.
The size of the Hotmail spam problem came to light when Microsoft unveiled the results of a study into the use of its Sender ID spam-filtering technology at this week's Authentication and Online Trust Summit in Boston.
Ryan Hamlin, technology care and safety general manager at Microsoft, said at the summit: "Spam and phishing attacks continue to undermine user productivity, trust and online confidence, but Sender ID is providing tangible benefits."
Sender ID now blocks more than 20 million unsolicited emails every day, adding up to a total of 3.8 billion.
Microsoft claims that Sender ID has enjoyed a three-fold increase in adoption over the past year, and now protects over eight million domains.
Microsoft opened up Sender ID last year with a royalty-free licence in an attempt to increase its market share.
Hotmail still riddled with spam
By Jane Hoskyn on Apr 23, 2007 11:44AM