Hewlett-Packard (HPQ) and AOL sign browser deal

Hewlett-Packard Company (NYSE: HPQ) has inked a deal with Time Warner Inc.'s (NYSE: TWX) AOL unit to install AOL's web browser start page, toolbar and search on HP personal computers sold worldwide. This may not sound like a big deal, but it is, since the vast majority of computer users never change the default start pages that load when their Internet Explorer web browser starts up. Having AOL's search engine, which is powered by Google Inc. (NASDAQ: GOOG), as the default is a biggie as well. HP, after all, sells more desktop and laptop computers than any company on the planet at this time.

AOL will use its custom "myAOL" homepage as the default website on all HP PCs, which will encourage new HP owners to use AOL's services like email, news, finance and weather. While some computer users complain of unwanted "bloatware" that ships on new PCs, the practice of providing new PC owners with default relationships to service providers such as AOL is likely to continue.

Now, what is unanswered here is how this will affect HP's existing relationship with internet portal Yahoo, Inc. (NASDAQ: YHOO) which has been in place for almost one year. Since HP did not make a single reference to this relationship, one must surmise that HP is dumping Yahoo! completely from its systems and replacing Yahoo!'s services with AOL's services. If that is the case, Yahoo! just earned a huge black eye and AOL came out very rosy. With HP competitor Dell, Inc. (NASDAQ: DELL) using Google services as the default on its PCs, this leaves Yahoo! in a tough position without a top-tier PC partner.