Microsoft has confirmed that more than 10,000 Hotmail customers, mainly based in Europe, had their usernames and passwords compromised during a phishing attack.

Microsoft is making Hotmail's inbox the hub of social and business networking updates.

The move is part of a sweeping makeover of the company's putative Windows Live service, a catch-all that includes Microsoft's web mail, photo sharing, instant messenger, calendar, blogging, net storage and other online services.