At the time of the search, was he a Microsoft employee? At first glance, it appears that he was. This is Microsoft ordering a search of the email of one of its own employees, on its own servers.
Yes, there may be a distinction between private and company emails. But it seems like the lines are somewhat blurry, here.
Microsoft didn't search their employee's email. They searched the blogger's email, the one who wrote about and published screen shots of Windows 8. This is how they found that their employee had leaked the info; they saw his email with the blogger.
Hotmail is a service offered to the public, and the person was accessing it as such. The hotmail account was his personal email account, not his company-provided email account.
Imagine if Ford motors said: Oh, we can look into the Ford cars that Ford employees have bought with their own money and drive to weekend outings with their families, because we made and service the cars.
Hotmail is a service offered to the public by a private entity, subject to certain terms and conditions - one of which is that the private entity (Microsoft) is allowed to put its own interests ahead of those of the user when those interests are threatened.
Should webmail and similar services be regulated so as to put the interests of consumers ahead of service providers? Perhaps, and in many ways this is the approach taken by European regulators in many industries. On the other hand, it has been argued that the rather onerous data protection regulations in the EU are partly to blame for the lesser competitiveness of European firms in that marketplace, by imposing overly burdensome regulatory regimes on entrepreneurs and thus making the barriers to marketplace entry far higher than in the US.
Actually they checked the blogger's account, so it's more like Ford saying they can look into any Ford car if they think an employee is hiding something in it. Of course in this analogy all Ford buyers claim to agree to that so who really knows.
Yes, there may be a distinction between private and company emails. But it seems like the lines are somewhat blurry, here.