WSJ: Dell, Google Near Software Pact

In yet another symbol of Microsoft's softening dominance of the computer industry, news broke Tuesday that Google may be close to a deal with Dell to preinstall its software on new computers from the manufacturer.

According to the Wall Street Journal, quoting sources close to the matter, Google would pay Dell $1 billion over three years for the rights to place its software as the default applications on new Dell computers.

Such a deal could be potentially damaging to the Redmond giant: Google's ties with Firefox could mean the open source browser would replace Internet Explorer by default; its toolbar, search and instant messaging products upstaging similar products by MSN; and a host of non-Microsoft software the company has thrown its weight behind could appear on Dell's machines.

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Dell controls a large portion of the personal computing market with a 33 percent share in the U.S. and 18 percent of worldwide shipments. By placing its software on Dell PCs, Google could continue to build on its dominating search presence while taking a big step in moving onto the desktop.

For many years, Microsoft controlled the setup process that consumers see when they use their computers for the first time. However, bigger PC makers such as Dell and Hewlett Packard wanted more control over the "first boot sequence" as a new source of revenue for their companies, and recently Microsoft acquiesced to those demands.

Internal studies by Microsoft that were viewed by the WSJ warned of the issue of third-party software being preinstalled as a possible financial problem for the company. The reports say manufacturers could use this as leverage to negotiate for lower prices as less and less of the original operating systems are used.

Most computer users after setting up a new computer don't change the original settings, which is also why being part of that "first boot sequence" is so valuable.

Both Google and Dell acknowledged they are working together, but neither would provide any further details as to the extent of the partnership.

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