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Last Updated: Friday, 26 May 2006, 10:39 GMT 11:39 UK
Dell deal bolsters Google search
Dell laptops
Google software will come as standard in Dell machines
Google has taken a major step towards challenging the dominance of Microsoft by signing a deal with Dell.

The agreement means millions of Dell computers will leave the factories with Google software already installed on them.

The software includes several personal computer applications, a Google toolbar and a co-branded homepage.

This could pose a serious challenge to the hold Microsoft has enjoyed on 90% of the world's computers.

The Seattle software giant has enjoyed a significant advantage over rivals, with computers automatically defaulting to Microsoft products.

In practice, most people stay with the default programs and search technology that comes with their machine.

Programs available

Microsoft is now moving towards building its search technology into the new version of Internet Explorer, steering users towards its own MSN search service.

This has worried Google, which complained to US anti-trust officials. But those concerns were rejected two weeks ago by the US Justice Department, which said that the Microsoft move was not anti-competitive.

It's a really big deal for both companies. It's very good for them and very good for us
Eric Schmidt, Google CEO
The deal with Dell gives Google a potent weapon in its fierce rivalry with Microsoft. In the past, the net search giant has mostly had to rely on people downloading its software.

As well as individual downloads, in January Google introduced a free service called Google Pack, bundling software from a range of companies in a single download.

Included are Google's desktop, instant messaging and Google Earth mapping programs as well as the Firefox browser, Adobe's PDF reader and Norton anti-virus software from Symantec.

Now, a range of Google programs will come as standard on Dell computers. These include its desktop search software and toolbar.

More significantly, the default search engine on Microsoft's Internet Explorer will be set to Google.

"It's a really big deal for both companies. It's very good for them and very good for us," said Google CEO Eric Schmidt.

Follow the money

Potentially, Google will gain exposure to millions of consumers who might otherwise have used Microsoft's search services.

Microsoft and Google have adopted different business models. Instead of selling software to make a profit, Google makes money by selling advertising to firms that want access to those who use its free products.

Microsoft has identified this sort of software as a key threat to its business, which relies on the healthy margins it earns from Windows and its Office productivity suite.

There are some limits on the deal. Dell will only install Google software on machines sold to small and medium-size businesses and to consumers.

Consumer sales only accounted for 14% of Dell's revenue in the last financial quarter.

Yahoo deal

The deal was announced on the same day as two other tech giants, Yahoo and eBay, joined forces.

Under the deal, Yahoo, the largest internet media firm, will be the exclusive provider of branded advertising on eBay's site.

In exchange, Yahoo will use eBay's payment system PayPal, to permit its customers to pay for Yahoo services.

Together Yahoo and eBay will reach more than 80% of the US internet audience, and the partnership could be the first step towards a global alliance.

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