Dell, Google in Software Deal

Updated from 3:49 p.m. EDT

Dell has rented a piece of prime real estate to Google in a deal unveiled by Google CEO Eric Schmidt.

Under the terms of the deal, the world's No. 1 PC maker will preload special Google software onto millions of its machines before shipping them to customers.

The Google software, which will be accessible through a side pane of Microsoft's Internet Explorer 6 Web browser, will allow users to search for files on their computer hard drives as well as for emails.

Mountain View, Calif.-based Google will also place a Web search toolbar on Dell PCs, and a special co-branded Dell/Google Web site will serve as the default home page when users connect to the Internet, Schmidt told attendees at the Goldman Sachs Internet conference Thursday.

The software will be included on Dell's consumer PCs and its small and medium-size business PCs, as well as select enterprise customers on a global basis, according to Google.

A report in The Wall Street Journal, which first reported discussions between the two companies in February, estimated that the deal could involve 100 million PCs

"Users are creating and managing an ever-increasing amount of information on their computers," said a Google representative in an email. "We have heard from customers that they want tools that enable them to search and organize their emails, documents, photos, and music quickly and easily."

The move by Google is a direct challenge to Microsoft, whose Windows operating system controls much of the standard user experience on PCs.

Google has complained that Microsoft's next version of its Web browser makes it too difficult for users to change the search engine's default setting away from Microsoft.

Samir Bhavnani, director of research at industry researcher Current Analysis, said the alliance does not represent a huge blow to Microsoft.

The Google software is really not that different than the various other software that comes preloaded on PCs, he said.

"What would make this a big deal is if Dell was installing some kind of Google-sponsored, Linux-based operating system," said Bhavnani.

Still, he said that the deal means Google could potentially charge advertisers higher rates, because the search company's link to consumers is stronger now that it is directly accessible via a computer desktop.