Proctor: Google takes Dell, for better and for worse

Monday, May 29, 2006

Yahoo! partnering with eBay.

Google joining forces with Dell.

There's been plenty of consolidation and cross-marketing among phone companies, from SBC joining with AT&T, to cell-phone companies like Sprint signing deals to carry Sanyo phones.

Now, online heavyweights are jumping into the fray. Google and Dell last week confirmed a three-year partnership, in which Dell computers will come packed with Google features and software. The features will include a Google toolbar and search engine in the Internet Explorer 6 side pane, and a Google-Dell home page.

Analysts say Google is essentially paying for access to Dell customers and keeping them away from Microsoft and Yahoo. While it makes sense strategically, it could have a negative effect on Google's stock.

"We think Google is doing the right thing for the long term, but we see conflicting potential impacts on the stock," wrote analyst Benjamin Schachter in a research note Friday.

As for Yahoo and eBay: "This is a great move for both of them," Rick Aristotle Munarriz, a senior analyst with Motley Fool, told PC Magazine. "These are two companies that were great and their performance on the market in the past few years has been a little disappointing, so it's their way of saying 'Hey, we can matter again.' "