Update: Google knocks Microsoft off Dell PCs

When consumers boot up their new Dell Inc. desktops and notebooks next week, they will find a Google Inc. homepage and search tools, not the familiar Microsoft Corp. versions, the world's largest PC vendor confirmed Thursday.

Dell will factory-install the Google desktop, toolbar, search engine and homepage on desktops and notebooks shipping to consumers and small and medium-size businesses worldwide, said Dell spokesman Jess Blackburn.

It will also be installed on certain enterprise systems, unless the buyer specifies its own corporate software tools. Dell will begin shipping the new configuration by the end of May.

"We've reached an agreement to include Google's search and organization capabilities on our systems. Customers will still have the option to choose another search tool," Blackburn said.

Google Chief Executive Officer Eric Schmidt also confirmed the deal on Thursday at a Goldman Sachs Group Inc. conference. "Dell is the pioneer in this. They've figured out a way to work with other partners to essentially fill out the Windows platform," he said at the event, which was webcast. "Windows lacks certain features, and Dell figured out a way to add them."

The Microsoft versions of those tools will still be installed on the PCs, but they will not boot up automatically unless a user changes his default settings. Dell also pre-installs software such as office productivity, Internet connectivity and security tools, depending on customer requirements.

Dell did not disclose the terms of the agreement, which had been rumored as long ago as February.

Though the news may appear to be a blow to Microsoft, Rob Enderle, analyst with the Enderle Group, said it actually could serve the company well in the near term as it continues to battle antitrust charges in the European Union.

"Initially this works in Microsoft's favor, because they're trying to showcase that there is no lock-in on the desktop," he said. "Right now, a couple of the big [hardware] guys going with Google is a good thing."

However, the PC desktop is increasingly becoming a battleground for companies such as Google, Yahoo Inc. and eBay Inc. that want to drive PC users to their Internet-based services to earn ad revenue, Enderle said. "Microsoft will have to respond" as competition for that visibility grows, he said.

(Elizabeth Montalbano in San Francisco and Juan Carlos Perez in Miami contributed to this report.)