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OLPC founder, Negroponte, has a few words for Intel on low-cost laptops

Nicholas Negroponte, founder of the "One Laptop Per Child" initiative, accused chip maker Intel of undermining the OLPC by selling its own cut-price laptop, the Classmate.  Negroponte claims that Intel is trying to drive him out of the market.

According to BBC, Negroponte said that Intel hurt his mission in trying to distribute laptops to kids in developing countries "enormously".  Intel's chairman, Craig Barrett, has denied all claims of undercutting Negroponte's mission, stating, "We're not trying to drive [him] out of business. We're trying to bring capability to young people."

Though the hardware specifications differ between Intel’s low-cost laptops and Negroponte's, OLPC founder believes that the main problem is that his machines use AMD processors, Intel's main competitor. "Intel and AMD fight viciously," he told CBS. "We're just sort of caught in the middle."

Professor Negroponte also claimed that Intel has distributed marketing literature to governments entailing negative aspects of the One Laptop Per Child and outlining superior aspects of the Classmate.  Some of the literature had titles such as "the shortcomings of the One Laptop per Child approach".  Intel responded by saying that it was just making comparisons between the Classmate PC and the other device in the market.

Countries have until May 31 to place their orders for the first round of PCs.  The launch price will be $175 but the goal is to get them down to $100 each.  Intel is taking orders for the Classmate for over $200 each.



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RE: Economics 101
By osalcido on 5/21/2007 8:13:55 PM , Rating: -1
quote:
Intel's entry dilutes the market and makes this more difficult.


I don't quite understand how Intel's entry dilutes the market. Do you mean saturates? I hope not. Do you really think there's not enough 3rd world kids to go around?

quote:
To do this, he needs to reach an efficient scale of production to benefit from economies of scale -- hence why it is $175 now but the aim is to hit $100 in the future.


Again, it's not like theres not enough poor kids to go around. If it's true that the market becomes too saturated for the OLPC (Only two manufacturers among billions of poverty stricken people? umm doesnt seem likely) Negroponte can simply scale back or *gasp* compete on features and performance.

quote:
So ultimately, no this probably won't help the children. Worst case scenario: Intel's entry makes money for Intel, Negroponte may not sell as many laptops, and in the end everybody pays $175-$200 instead of $100.


People are going to pay $175 on the OLPC anyways. This price was set before Intel made a move. If Negroponte is truly a man of the people and is selling these things at $0 profit, what makes you think he'll be able to chop $75 bucks off anytime in the near-future? He must be some manufacturing guru to accomplish that feat....in which case competition with Intel should hardly pose a problem.


RE: Economics 101
By spluurfg on 5/21/2007 8:26:40 PM , Rating: 5
quote:
Do you really think there's not enough 3rd world kids to go around?


Not necessarily children, but orders from governments, which I am assuming is probably a lot less than the number of children in third world countries.

quote:
People are going to pay $175 on the OLPC anyways. This price was set before Intel made a move. If Negroponte is truly a man of the people and is selling these things at $0 profit, what makes you think he'll be able to chop $75 bucks off anytime in the near-future? He must be some manufacturing guru to accomplish that feat....in which case competition with Intel should hardly pose a problem.


...I think that he'll be able to 'chop $75 bucks off' because the article predicted that the price would fall to $100. I am assuming this figure is based on model where the price falls due to lower manufacturing costs per unit with increased production, and not because they think he's a 'guru'. A reduction of that much due to increased production is not a stretch by any means for electronics.

Note that the article states that Intel may be selling these things at below cost. Why would you sell something at below cost? Perhaps to secure a foothold in the market, and drive out your competitor? I'm betting that Intel has a lot more cash lying around than Negroponte's non profit organization. Furthermore, Intel may be desperate to destroy any market share that AMD can find.

Obviously this is all conjecture -- most of it simply an explanation of what I think Negroponte is saying, for those who think that he's a moron because he doesn't know what Econs 101 is.


RE: Economics 101
By osalcido on 5/21/2007 10:58:00 PM , Rating: 2
quote:
Note that the article states that Intel may be selling these things at below cost. Why would you sell something at below cost? Perhaps to secure a foothold in the market, and drive out your competitor? I'm betting that Intel has a lot more cash lying around than Negroponte's non profit organization. Furthermore, Intel may be desperate to destroy any market share that AMD can find.
</quote

So Negroponte sells these things at a profit big enough to increase manufacturing capacity = good.

Intel sells them at a small loss = bad.

I think I see where you coming from now =)


RE: Economics 101
By spluurfg on 5/22/2007 4:53:13 AM , Rating: 2
Well, they aren't really selling them for a profit, as it's a non profit organization... I think that as long as they have enough orders they should be able to lower costs.


RE: Economics 101
By osalcido on 5/22/2007 2:05:53 PM , Rating: 2
Um well how will they pay for these future manufacturing capacities that you speak of.. you know the ones that will allow them to drop the price..


RE: Economics 101
By masher2 (blog) on 5/22/2007 5:00:33 PM , Rating: 3
> "Well, they aren't really selling them for a profit, as it's a non profit organization"

Nonprofit organizations can and do make profit on goods and services. They simply don't pass those profits on to shareholders. Rather, they use them to pay salaries and/or finance other ventures.


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