Behind the Intel/OLPC Breakup

Intel has dumped the One Laptop Per Child program, and the nonprofit just announced disappointing sales. But founder Nicholas Negroponte remains optimistic

by Reena Jana

In mid-December, in the hip, Frank Gehry-designed IAC (IACI) building in New York, Intel (INTC) held a small gathering for a dozen or so journalists to preview the corporation's planned showcase at this week's 2008 Consumer Electronics Show (CES) in Las Vegas. Curiously missing: any mention of a much-anticipated, low-cost laptop, called the XO, for children in developing countries, featuring an Intel microprocessor, with hardware designed by the Santa Clara (Calif.)-based nonprofit, One Laptop Per Child (OLPC). The company had been planning to launch it at CES.

In hindsight, the omission seems prophetic. (Intel spokesperson Chuck Mulloy tells BusinessWeek that the company was still working on the prototype for the Intel-OLPC laptop and wasn't ready to show it to the press in advance.) But leading up to CES, a furious public spat between OLPC's founder, Nicholas Negroponte, a professor on leave from MIT and co-founder of the famed MIT Media Lab, and the chipmaker erupted when Intel first notified Negroponte via e-mail on Jan. 3 that Intel was bowing out of the project. The feud highlights the tumultuous history of OLPC, just as the nonprofit issued the official results of its recent "Give One, Get One" sales promotion, and as Negroponte prepares to give a high-profile speech at CES on Jan. 9 as the closing talk of CES's program, "Technology and Emerging Countries: Advancing Development Through Technology Investments."

OLPC Holiday Promotion

On Jan. 7, OLPC released figures from its biggest sales push to date. The idea behind the recent Give One, Get One campaign, which ran in the U.S. for two weeks starting Nov. 12, was to tap into holiday gadget lust and attract American customers to purchase two XOs for $399—one for themselves and one to be shipped to a child in Afghanistan, Cambodia, Ethiopia, Mongolia, or Rwanda. Since Sept. 24, OLPC has also run a "give many" initiative, asking for $200 donations.

When asked about sales during the Give One, Get One promotion, Negroponte says that OLPC saw $35 million in sales and that 162,000 computers were shipped. The Jan. 7 press release simply reports "over 100,000." The 162,000 figure, clarifies a spokesman for the outside PR firm working with OLPC, breaks down to 81,000 purchased for use, and 81,000 given to kids in developing nations.

However the figures don't quite add up. The amount raised should be $32.3 million—nearly $3 million less than the total amount cited in the press release. The difference, says another outside spokeswoman for OLPC, can be attributed mainly to contributions given to OLPC during the promotion that did not result in direct sales of computers. She did not provide an exact breakdown of the $3 million. Negroponte says that all of the money raised will be spent on making and distributing the XO laptop to kids in the five nations initially earmarked to receive them, among other countries.

Although $35 million—or $32 million—might seem like a large sum to any nonprofit seeking to raise eight figures in only a couple of weeks, the number of XOs sold is much smaller than initial projections. In 2005, when the OLPC initiative was first announced, Negroponte said he hoped to produce five to ten million units by the end of 2006 or the beginning of 2007, with, ideally, sales orders to match. The total units that have been sold, Negroponte says, is around 500,000—"lower than I'd hoped," he admits.

XO Project Hit Snags

The project repeatedly hit snags. Unforeseen production costs nearly doubled the projected price of $100 per machine, hindering poor nations from purchasing it. A Nigerian-owned, Massachusetts-based firm, Lagos Analysis, is suing the foundation for copyright infringement of its laptop keyboard design.