Behind the Intel/OLPC Breakup

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And although OLPC made headlines for its elegant design, and Negroponte had many meetings with heads of state in various nations around the globe, many did not commit to purchasing the machines. The Indian Ministry of Education decided not to purchase OLPCs in 2006, citing a greater need to support classrooms and teachers as opposed to the XO; and the Chinese government hasn't bought any to date. The Give One, Get One promotion signalled that the machines weren't selling as fast as they might have, even after they went into mass production in November, 2007.

To put sales of the XO—so hyped for its sleek silhouette it has been featured in museum and art shows and in countless articles in design publications—in perspective: Apple shipped 2,164,000 Macintosh computers in the fourth quarter of 2007 alone. While that comparison might be a bit unfair, it's clear that the XO isn't catching on quite as Negroponte had foreseen. Yet when asked about expected sales for 2008, he remains the optimist.

Internet Support Planned

"I hope that another 1.5 to 2.5 million will be sold during 2008," he says. But no longer having Intel's investment—which Negroponte says included a further $12 million toward support of the project, including sales and marketing resources from Intel, beyond engineering contributions—will certainly affect how well the XO sells this year.

Still, the $35 million (or so) raised from the Give One, Get One campaign will help OLPC continue manufacturing and shipping the XO without Intel's help.

Critics and skeptics have pointed out that merely getting the XO to poor nations isn't enough. When asked about this, Negroponte says that OLPC is providing Internet access everywhere the XO is shipped and is working on developing partnerships with local telecommunications systems to make use of unused bandwidth. The nonprofit is soliciting volunteer software programmers and developers around the world to create open-source educational material for the computers.

Intel Cites "Classmate" Conflict

So why the bitter split so close to what was intended to be the high-profile debut of a new, low-cost PC for underprivileged children? Via spokesman Mulloy, Intel states that it could not accommodate Negroponte's alleged demands that the company cease to market its own inexpensive PC, the Classmate, to children in poor regions where OLPC was already marketing its own device.

Negroponte denies that he made any such demands—and adds that he was shocked by the company's decision to jump ship. He says that only 24 hours before he was notified, he was working on a joint statement with Intel on the success of the collaboration, which he would refer to in his speech at CES. And he says that Intel Chief Executive Officer Paul Otellini was also set to mention it in his keynote. (Otellini's presentation focused on devices for the mobile Internet powered by new Intel chips and featured a line-up of celebrity guests includingTom Hanks and members of the band Smash Mouth.)

Negroponte says that the board of OLPC considered dropping Intel from the partnership at a meeting on Dec. 18, which Intel reps did not attend. Why? Negroponte alleges that Intel repeatedly failed to live up to various obligations. Mulloy reacts by saying "Intel, as a rule, doesn't discuss contractual agreements. But we didn't break any."

Although Intel has dropped out of the project, other powerful tech companies are continuing to offer support to OLPC, including Google (GOOG), AMD (AMD), eBay (EBAY), and News Corp. (NWS).

Intel claims that it remains "aligned with OLPC," in terms of wanting to support education in developing world nations, says Mulloy. But he adds that Intel's position in regard to supporting education in impoverished communities has always had more to do with providing laptops, whether they be the Classmate or the XO. The company announced last fall that it is targeting 1.5 million teachers internationally via an online teacher-training program on how to use computers and software in the classroom.

"We're disappointed," Mulloy says. "We're truly sorry this [partnership with OLPC] didn't work out."

Jana is the Innovation Dept. editor for BusinessWeek.