One of Microsoft's strategies for catching up with Google became more clear today with word that the Redmond company has struck a deal with PC giant Dell to preinstall the company's Live Search toolbar on new Dell PCs. The deal also shows how Microsoft is spending some of the money it didn't end up putting toward a Yahoo acquisition.

Citing anonymous sources, ZDNet's Mary Jo Foley is reporting that Microsoft "has offered Dell sweet enough terms to entice the PC maker to replace its search-preload deal with Google with a comparable offering from Microsoft."

The report follows Microsoft's announcement in June that HP will install the Live Search toolbar and make Live Search the browser default on consumer PCs shipping in the U.S. and Canada starting in January. Microsoft also announced a toolbar deal with Lenovo last year.

These kinds of deals are considered key because many PC users don't change their default toolbars or search providers. Microsoft is currently a distant third to Google and Yahoo in Internet search, with less than 10 percent of the U.S. market.

One key question will be the geographic scope of the Dell deal -- whether it's confined to North America or worldwide. But either way, the deal gives Microsoft a key position with the two largest computer makers. Dell and HP had a combined 54 percent of the U.S. market as of the third quarter, according to IDC.