Microsoft is reported to have worked closely with the US intelligence agencies to spy on users and provided information to National Security Agency (NSA) under the Prism surveillance programme.
According to documents obtained by the Guardian, Microsoft helped the NSA to circumvent its encryption to address concerns that the agency would be unable to intercept web chats on the new Outlook.com portal.
The news paper reported that the agency already had pre-encryption stage access to email on Outlook.com, including Hotmail.
Microsoft has also reported to be worked with the FBI in 2013 to enable the NSA easier access through Prism to its SkyDrive service.
Reacting to the Guardian’s allegations, Microsoft said, "We have clear principles which guide the response across our entire company to government demands for customer information for both law enforcement and national security issues."
The company said it does not provide any government with blanket or direct access to SkyDrive, Outlook.com, Skype or any of its product.
"Finally when we upgrade or update products legal obligations may in some circumstances require that we maintain the ability to provide information in response to a law enforcement or national security request," Microsoft said.
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"There are aspects of this debate that we wish we were able to discuss more freely. That’s why we’ve argued for additional transparency that would help everyone understand and debate these important issues."
Last month, Facebook, Microsoft and Apple have revealed details of surveillance data requests from the US government.
