Google Inc and Dell Inc have reached an agreement to install Google software at the factory on millions of Dell computers over the next few years, Google's chief executive Eric Schmidt said on Thursday.
Schmidt said the arrangement meant that Google's search toolbar would appear on the screens of all new Dell systems, and that Dell users will be directed to a Web page branded by the two companies.
Schmidt, speaking at a Goldman Sachs Internet conference in Las Vegas, said the companies would "share in the revenue" from the deal.
While the terms were not released, many analysts assume that Google paid Dell an upfront sum. If that is the case, said Safa Rashtchy, an analyst with Piper Jaffray, it would be the beginning of a era in which Google is starting to spend money in order to keep growing.
Schmidt said that this would be first of several agreements with Dell. The length of the deal was not disclosed.
The software, Dell said, would be included only in machines sold to consumers and to small and medium-sized businesses. While last quarter the consumer market accounted for roughly 14 percent of Dell's revenue, the deal will nonetheless involve millions of new computers over time.
Google could receive a significant boost in its intense competition with Microsoft for search advertising revenue. By ensuring prime real estate on Dell computers, Google will gain exposure to millions of consumers who might otherwise have used Microsoft's search technology.
The agreement comes only two weeks after the Justice Department found that the design of Microsoft's new Web browser did not pose a threat to competition in the Internet search market. Google had expressed concern to antitrust officials that Microsoft's browser routinely steers users to Microsoft's search service, MSN, giving it an unfair advantage.
"This is very important for Google, particularly if you look at how Microsoft is going to be pushing its search technology by embedding it in Internet Explorer," Rashtchy said.
"Most people are going to stay with the default search technology that comes with their machine," Rashtchy said.