Microsoft exercised its warrants to purchase 707,964 Commtouch shares at $28.25 per share, totaling $20 million and representing a 4.7 percent equity stake, the two companies said in a statement. The warrants were granted to the software giant by Commtouch two months ago.
In October, Microsoft agreed to let Santa Clara, Calif.-based Commtouch handle some of the company's Microsoft Network online services, including its Web-based email and instant messaging.
As part of the deal, the two companies said they are working together to offer customers Commtouch's instant messaging capabilities through the MSN Messenger Service and Microsoft Passport, a universal login technology.
"This investment strongly reinforces Microsoft's recognition of Commtouch as both a key technical partner and a leading provider of integrated email outsourcing services," Commtouch chief executive Gideon Mantel said in a statement.