Google, Dell in deal on PC software package -source

NEW YORK, May 25 (Reuters) Google Inc and Dell Inc have reached an agreement for the No 1 personal computer maker to factory-install a package of Google software on its systems, shoring up a test-run between the two companies, two people familiar with the matter said on Thursday.

In a potential blow to Microsoft Corp. , Google will incorporate its desktop software which integrates a number of personal computing applications, a Google tool bar and a co-branded Internet homepage on Dell computers, one person said.

The two companies confirmed in February a test to install Google's software package, which would allow PC customers to search both the public Web and local information stored on their computers.

At the time, Dell and Google were reported to be in talks on installing the software on as many as 100 million new Dell PCs, following a bidding process in which Google edged out Microsoft and after Web search rival Yahoo withdrew.

The terms and scope of the deal surfacing on Thursday were not immediately clear. Google and Dell officials had no immediate comment.

A large-scale agreement with the world's largest PC maker would be a major inroad for Google. A decade ago, Microsoft used its leverage over PC makers to gain control over which software came installed in new computers, betting that customers rarely bother to replace many of those programs.

REUTERS DH RN0058