Google and Dell have aligned to offer personal computer users an integrated package. Dell computers will now come with Google Desktop and Google Toolbar and a personalized Google/Dell start page. The two companies will share Internet ad revenue.
The deal has been rumored for some time, but was confirmed May 24 at the Goldman Sachs Annual Internet Conference by Google CEO Eric Schmidt, who told reporters at the conference that it is a "big, big deal for both companies."
Google partnered with Dell after Yahoo pulled out of negotiations. The deal stands as a threat to Microsoft, which has had claim over the desktop domain for years.
Why does it matter?
"Google represents the new, big mover and shaker in the industry," says Rob Enderle, principal analyst at the Enderle Group. "There are multiple things out there with Google's fingerprints on it." Google's deal with Dell further opens the door for subsidized PC sales, provided Dell decides to lower PC prices due to its ad revenue gains.
Despite talk to the contrary, Enderle believes this is a positive for Microsoft because the increased competition helps to dispel its image as a monopolist.
The Google-Dell deal, combined with a recent eBay-Yahoo pact, places a lot of pressure on Microsoft.
"Ebay's partnership with Yahoo is a competitive response to Google," says Enderle. "But there are rumors out there that Microsoft is looking to buy eBay."
1 Financial terms of the three-year Dell-Google deal were not disclosed, but according to speculation from sources in The Wall Street Journal earlier this year, Google may have considered paying as much as $1 billion for the deal.
2 Also in recent news, Internet giant Yahoo has made a deal with online auction house eBay to have exclusive rights to graphical ads on eBay and have Yahoo's brand and search function as part of the eBay toolbar. Ebay's PayPal will become the preferred method for Yahoo users to pay for purchases.
3 According to market researcher IDC, Dell sold 9.64 million PCs in the first quarter of 2006, down from 10.5 million in Q4 2005.
4 Google's portion of Web advertising came to 53% for Q1 2006 out of the $3.9 billion market. Google accounted for 50% of all Internet searches conducted in the US in April.
5 The news comes on the heels of an announcement that Dell, following in the footsteps of Apple, plans to open two mall stores this summer, the first in Dallas and the second in West Nyack, NY. The Dell stores will allow customers to try out display models and then order products for later delivery.