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Google Wins Bundling Deal with Dell

In a move that’s gotta be raising hackles at Microsoft, leading PC manufacturer Dell and Google have entered into a three-year revenue sharing agreement which will see Google desktop software bundled on Dell systems, starting by the end of May 2006 for systems aimed at consumers and small businesses, and later to large corporate customers. Google and Dell will share profits stemming from the deal; income will mostly stem from affiliate revenue from Google’s established relationships with online retailers.

According to the companies, the deal includes bundling Google Desktop Search, the Google Toolbar, as well as a default co-branded Internet home page. At a Goldman Sachs investors conference yesterday, Google CEO Eric Schmidt hinted this may be just the first of several agreements between the two companies.

The deal appears to have been struck after Google rival Yahoo withdrew from pursuing a deal with Dell, and Google apparently outbid Microsoft for the lucrative desktop positioning on Dell systems. The appeal of the bundling deal is the belief that many customers never replace or upgrade software purchased with PCs; thus, the Google software will be part of many Dell customers’ computing activities for the functional lifetime of the computer.

The search capability in recent versions of Google Desktop has come under fire from privacy and security advocates for its capability to comingle desktop and Internet search queries, which partially involves sending usage data back to Google.