Microsoft Corp.'s search software will replace Google Inc.'s rival program on Lenovo Group Ltd. personal computers, a victory in Microsoft's fight against the dominant search company.
The deal is exclusive for several years, Microsoft Corp. Senior Product Manager Justin Osmer said in an interview. Osmer declined to be more specific about the terms. Lenovo Group Ltd., the world's third-largest personal-computer maker, had included Google Inc.'s search tool-bar program on some of its machines, said Peter Gaucher, executive director for strategic alliances at Lenovo.
Microsoft, the third-largest Internet-search company, lags behind Mountain View, California-based Google and Yahoo! Inc. in both search usage and partnerships with PC makers. Google's search tool bar is installed on Dell Inc. machines, while Yahoo has an agreement with Hewlett-Packard Co. “If you can become a default on anybody's computer, that's a crucial step to get anybody to even look at you,” said Danny Sullivan, who tracks the search industry and writes a blog called Search Engine Land.
“People know Google is a big search brand, and people tend to default to that first.” PCs with Microsoft's search tool bar will start shipping this month. Lenovo also will set its Internet browser software to start with a version of Microsoft's Live.com Web page. Lenovo, based in Raleigh, North Carolina, chose Microsoft because it wanted a way to create an Internet startup page that highlighted Lenovo's products while allowing users to tweak the page based on their interests, Gaucher said.
Microsoft plans to announce more such partnerships in the coming months and has several in the works, Osmer said, declining to specify. Microsoft also may start packaging its search tool bar with some of its software downloads, he said. The company is avoiding deals that require it to spend too much in exchange for promoting its search software, Osmer said. Redmond, Washington-based Microsoft ended negotiations with Dell over a search partnership because Dell wanted too much money, he said.
Dell, the world's second-largest personal-computer maker, opted to use Google instead. “We are not in the business to lose money hand over fist, year after year, so these have to make fiscal sense to us,” Osmer said. “The Dell example is one where it ballooned to a point where it did not make any sense to play in that sandbox, so we let that one go.” Google officials didn't respond to a call and e-mails seeking comment.
Shares of Microsoft rose 33 cents, or 1.2%, to $27.05 (€20.46) at 10:27 a.m. New York time in Nasdaq Stock Market trading. Google shares declined $1.37 to $441.66. Microsoft Chief Executive Steve Ballmer said last month that the company would boost operating expenses by almost $2.7 billion (€2 billion) in the coming fiscal year, partially to fund agreements that bring customers to Microsoft's Internet services. Ballmer said if he saw additional opportunities to get online customers, he might increase that budget again.
The cost of the Lenovo agreement was probably included in Ballmer's forecast and therefore shouldn't require an increase, Osmer said. He wasn't sure if any future partnerships would require Microsoft to boost its projected spending.Microsoft accounted for 8.9% of US Internet searches in January, compared with 54% for Google, according to Nielsen//NetRatings, which tracks Internet usage. Yahoo had 23%. (Bloomberg)