"It's a really big deal for both companies," Google CEO Eric Schmidt said Thursday at an Internet industry conference in Las Vegas. "It's very good for them and very good for us."
Financial terms weren't disclosed, an indication that the amount being paid isn't large enough to affect either of the companies' finances. When the negotiations between the two companies were first reported nearly four months ago, Google reportedly was considering paying Dell up to $1 billion to load its software over a three-year period.
The partnership means millions of Dell computers will leave the factories with Google software already installed, an advantage that could widen the usage of the products and provide another boost to Google's already rapidly growing profits.
Mountain View, Calif.-based Google Inc. so far has mostly had to rely on users downloading its software from the Internet.
The deal also could blunt Microsoft's competitive edge.
Powered by its dominant Windows operating system and leading Web browser, Microsoft has long been the guiding force for most people's computing experiences.
But Google has emerged as a serious threat during the past two years as it has rolled out an array of popular new products for doing everything from finding files on computer hard drives to keeping track of upcoming events.
This marks the second time in two weeks that Round Rock, Texas-based Dell has aligned itself with a company that's posing a threat to an industry leader.
Last week, the world's largest computer maker announced it would start using some processing chips made by Advanced Micro Devices Inc., which has been chipping away at the market share of Intel Corp.
Dell will install Google's desktop search software and its toolbar while preserving a space for the search engine in a side panel of Microsoft's Internet Explorer 6 browser. The home page on the browser will also be programmed to go to a Web page cobranded by Dell and Google, providing another springboard to feature advertising.
"It's essentially a turnkey solution for search," Schmidt said.
Google announced the alliance on the same day that another of its major rivals, Yahoo Inc., unveiled an extensive partnership with eBay Inc. The online auctioneer is one of Google's largest advertisers, but it had become agitated by the search engine's recent expansion into classified listings and online payments.
The Yahoo-eBay alliance initially unnerved Google investors Thursday, but news of the Dell deal provided a balm. Google shares gained $1.74 to close at $382.99 on the Nasdaq Stock Market, then slipped 99 cents in extended trading. Dell shares rose 12 cents to close at $24.30 on the Nasdaq, then added 9 cents in extended trading.