Dell has reached a deal with Google to incorporate its search software on new PCs.

Dell will factory-install the Google desktop, toolbar, search engine and homepage on desktops and notebooks shipping to consumers and small and medium-size businesses worldwide, said Dell spokesman Jess Blackburn.

It will also be installed on certain enterprise systems, unless the buyer specifies its own corporate software tools. Dell will begin shipping the new configuration by the end of May.

"We've reached an agreement to include Google's search and organiSation capabilities on our systems. Customers will still have the option to choose another search tool," Blackburn said.

Google CEO Eric Schmidt also confirmed the deal on Thursday at a Goldman Sachs Group conference. "Dell is the pioneer in this. They've figured out a way to work with other partners to essentially fill out the Windows platform," he said at the event, which was webcast. "Windows lacks certain features, and Dell figured out a way to add them."

The Microsoft versions of those tools will still be installed on the PCs, but they will not boot up automatically unless a user changes his default settings. Dell also pre-installs software such as office productivity, internet connectivity and security tools, depending on customer requirements.

Dell did not disclose the terms of the agreement, which had been rumoured as long ago as February.

Rob Enderle, analyst with the Enderle Group, said the news actually could serve Microsoft as it continues to try to reject European antitrust regulators that the company broke local competition rules.

"Initially this works in Microsoft's favour, because it’s trying to showcase that there is no lock-in on the desktop," he said. "Right now, a couple of the big guys going with Google is a good thing."

However, the PC desktop is increasingly becoming a battleground for companies such as Google, Yahoo and eBay that want to drive PC users to their internet-based services to earn ad revenue, Enderle said. "Microsoft will have to respond" as competition for that visibility grows, he said.