On Tuesday, Microsoft , which eventually will replace the highly popular Hotmail. The updated service is a big redesign that allows Outlook.com accounts to be synchronized across a range of devices, and includes integration with social networking sites like Facebook, Twitter and LinkedIn.

"While many people, particularly younger people, rely more on social messaging than email, email is still the preferred method for long-form communication," said Patrick Moorhead, an analyst with Moor Insights & Strategy. "Microsoft wants desperately to run away from Hotmail.... Hotmail got very stale with its feature set and needed to be replaced for this decade's use of richer media, like photos and video, social connected accounts, video communications and chat."

While Microsoft plans to replace Hotmail with Outlook.com, the company also is hoping that it will replace for a lot of people. And that would be a blow to a company that has become one of Microsoft's main rivals, competing on several different fronts, including free email services, search, browsers, operating systems and cloud-based enterprise apps.

"This is certainly a competitor to Gmail and, from what I can tell, a very solid competitor," said Dan Olds, an analyst with The Gabriel Consulting Group. "Hotmail still has more users than Gmail, although the gap is closing. And Microsoft wants to maintain that lead, if not expand it."

However, that isn't Microsoft's only goal here, according to Olds.