Intel Ends OLPC Partnership, Markets Own Low-Cost Laptop

A frail partnership between Intel and the One Laptop Per Child educational computing group was undone last month in part by an Intel saleswoman: She tried to persuade a Peruvian official to drop the country’s commitment to buy a quarter-million of the organization’s laptops in favor of Intel PCs.

Intel and the group had a rocky relationship from the start in their short-lived effort to get inexpensive laptops into the hands of the world’s poorest children.

But the saleswoman’s tactic was the final straw for Nicholas P. Negroponte ’66, the former Massachusetts Institute of Technology computer researcher and founder of the nonprofit effort.

He demanded that Intel stop what he saw as efforts to undermine the group’s sales, which meant ceasing to sell the rival computer. Intel chose instead to withdraw its support from One Laptop this week.

The project has been a lightning rod for controversy largely because the world’s most powerful software and chip making companies — Microsoft and Intel — had long resisted the project, for fear, according to many industry executives, that it would compete in markets they hoped to develop.

As a result, One Laptop’s XO computer comes with a processor built by Intel’s rival Advanced Micro Devices and open-source software, rather than Microsoft’s Windows and Office software.

After several years of publicly attacking the XO, Intel reversed itself over the summer and joined the organization’s board, agreeing to make an $18 million contribution and begin developing an Intel-based version of the computer.

Although Intel made an initial $6 million payment to One Laptop, the partnership was troubled from the outset as Intel sales representatives in the field competed actively against the $200 One Laptop machine by trying to sell a rival computer, a more costly Classmate PC.

The Classmate sells for about $350 with an installed version of Microsoft Office, and Intel is selling the machine through an array of sales organizations outside the United States.

Even after Intel joined the One Laptop board, in country after country, the two organizations competed to make government sales, Negroponte said Friday in a telephone interview. The relationship first frayed seriously in October, he said, when an Intel salesman gave a Mongolian government official a side-by-side comparison of the Classmate PC and the XO.

Negroponte said he was infuriated and threatened to throw Intel off the One Laptop board. In response, Intel’s chief executive, Paul S. Otellini, agreed to change Intel practices and he accelerated the development of the Intel prototype.

Sean Maloney, the company’s top sales and marketing executive, sent e-mail instructions to the sales team that were intended to end the practice of product comparisons.

Negroponte said eliminating the comparisons was required as part of a nondisparagement clause in the partnership agreement the two companies had signed.

In the field, according to Negroponte, nothing changed.

He complained, in particular, that Intel sales representatives were claiming that as a result of the company’s board position at One Laptop, Intel had information suggesting that the organization was in trouble.

Intel refused to respond to Negroponte’s specific account of the events that led to the end of the partnership.

Instead, Chuck Mulloy, an Intel spokesman, reiterated the company’s statement that Intel had decided to leave the organization after it reached a stalemate over whether the chip maker could continue to promote the Classmate.

“Our position continues to be that at the core of this is a philosophical impasse about how the market gets served,” he said.

Negroponte said that an Intel representative did not attend a board meeting of the group in Miami last month, citing a potential conflict of interest.

At the meeting, the board agreed that Negroponte should make a final effort to end Intel’s efforts to disrupt One Laptop’s sales.

A rapprochement never happened, however.

“They played another dirty trick in Peru,” he said. “It’s a little bit like McDonald’s competing with the World Food Program.”

In Peru, where One Laptop has begun shipping the first 40,000 PCs of a 270,000 system order, Isabelle Lama, an Intel saleswoman, tried to persuade Peru’s vice minister of education, Oscar Becerra Tresierra, that the Intel Classmate PC was a better choice for his primary school students.

Unfortunately for Intel, the vice minister is a longtime acquaintance of Negroponte and Seymour Papert, a member of the One Laptop team and an MIT professor who developed the Logo computer programming language. The education minister took notes on his contacts with the Intel saleswoman and sent them to One Laptop officials.

In a telephone interview on Friday, Tresierra said that his government had asked Intel for a proposal for secondary-school machines, and it had responded with a proposal offering the Classmate PC for primary grades.

“We told them this is a final decision, we are running the primary-grade project with the XO,” he said. “She wasn’t very happy.”

He said the decision to purchase the XO had come after the government had run a pilot project with the computers. “We were very happy with the results,” he said.

Until Intel surprised him by quitting on Thursday, Negroponte said he had still held out some hope that the relationship could be saved. The Intel XO was supposed to be introduced next week at the Consumer Electronics Show in keynote speeches to be made by Negroponte and Otellini, but the prototype will now be set aside.

Intel’s decision to leave was announced first in a series of phone calls made by a company spokesman to a small group of reporters. Some time later, D. Bruce Sewell, Intel’s senior vice president and general counsel, sent an e-mail message to Negroponte.

The note said that the statement, which had already been reported by wire services, was an inadvertent leak. He apologized for the way the announcement was handled.

For his part, Negroponte said he still hoped to sell 2 million to 3 million computers this year. Negroponte had originally hoped to sell up to 5 million computers.

The group did not get major orders; instead One Laptop has continued with a variety of smaller deals in countries including Uruguay, Peru and Mexico.

The group, based in Cambridge, Mass., announced Friday that its two-month “Give One, Get One” charitable promotion had generated $35 million and sold a total of 167,000 computers, half of them to be distributed in the developing world.

He said he still believed that the XO could have a big impact.

“If I can sell 1.5 million computers in Iraq, Afghanistan and Ethiopia, I will feel a lot better than other sales we might make.”