"Dell Inc and Google Inc confirmed on Tuesday they are testing a pre-installed package of Google software on Dell computers, in a potential blow to Microsoft Corp's dominance of desktop software," reports Reuters.
It says a report in The Wall Street Journal "said Dell and Google are in exclusive talks to install Google software on as many as 100 million new Dell PCs following a bidding process in which Google edged out Microsoft and after Yahoo Inc withdrew."
The idea spooked investors and "Google shares were down 5%, or $19.23, to $365.87 in afternoon trading on Nasdaq" says the story.
The problem is that Google will have to pay Dell lots of money to distribute its software. Even at $10 a PC that would be $1 billion, and it could be much more. The Reuters story says:
By some estimates, for Google to win broad product placement for its search software on major PC makers could require it to jack up customer acquisition costs by hundreds of millions of dollars from nearly zero now. Google's global popularity means that it acquires most customers for free.
Whether all this adds up to a row of beans is another matter, for two reasons. First, Dell changes its bundled software all the time, as it extracts more cash from software suppliers. Buy a Dell one month and you get Symantec and Paint Shop Pro, but a month later it's McAfee and Corel.
And if Google really wants to play in this game, there are more than 200 million PCs shipping with Microsoft software, so that's (say) $2 billion a year to be installed on all of them.
Second, many -- perhaps most -- users don't want bundled software they didn't ask for, and typically regard it as crap, even if it's actually quite good. There are plenty of blog posts complaining about the tedious and frustrating job of deleting it all.
This form of intertia selling can work for anti-virus software suppliers and some broadband ISPs because it can lead to users signing up to pay large sums for several years. In Google's case there is no such payback, and pre-installation could even devalue the Google brand. Especially if it ships stuff as flaky as Toolbar 4.....
Still, it's not all bad news. The idea of Google handing out $2 billion to subsidise PC sales will at least make Dell boss Michael Dell a happy bunny.
