took in $37 million. This past season, the foundation partnered with Amazon to sell the laptops and increased its advertising and marketing efforts substantially—to two or three times what they were in 2007, or close to $20 million, virtually all of it pro bono. Yet, sales fell off a cliff, coming in at about $2.5 million. Negroponte attributes “almost all” of the falloff to the poor economy, though others have theorized that the computers themselves had lost their appeal.
That was a huge blow to OLPC’s operating budget. But on top of the G1G1 nosedive, corporate sponsors of the organization also dropped out. Nortel, one of the biggest, recently filed for Chapter 11. EBay and SES, a network of satellite operators, had already ended their support. “There are a couple [others] at the moment whom I’m not expecting to renew,” Negroponte says. “They’re all cutting budgets and laying off people.”
Negroponte does not believe that people are turning away from the mission, or the vision, of OLPC. “I don’t think anybody has looked at OLPC and suggested to themselves that it’s no longer [viable]…I don’t think that’s happened,” he says.
Negroponte describes OLPC as having two economies. One is built around the laptops, the cost of producing them and the value they bring. The other, much smaller economy “is OLPC itself, which on the high months was burning about $1 million a month,” Negroponte says. “I never imaged that the smaller economy would be an issue. But it’s fueled by two things–Give One, Get One and corporate sponsorship.”
The dramatic falloffs in those two programs necessitated the layoffs, which were designed to bring OLPC operating costs to under $500,000 per month, probably closer to $350,000, according to Kane (both Kane and Negroponte work pro bono). The OLPC president joined the organization last May—he had previously held executive positions at RSA Security and several other companies and helped negotiate RSA’s 2006 sale to EMC—with the job of bringing more financial structure and business-savvy management to the organization. The layoffs and refocusing are part of that effort.
“You’re looking at a project that’s totally visionary that has to be converted into a business in he next phase: it’s already past that phase, and that’s the huge challenge,” Kane says. “To make it a business, you have to do certain actions that make it feel not non-profit anymore.” He says the foundation currently has enough cash to operate at least a year at its new staffing level.
The Laptop Economy—Poised for New Growth?
When it comes to the laptop economy, things seem far brighter. With roughly a million laptops in the field at a cost of about $225 apiece, Negroponte says he thinks of that economy as worth roughly $225 million. And he and Kane believe it is poised for more growth. The reorganization this month was designed to focus on opportunities in new markets, while turning relatively mature and already successful programs over to more business-like operations outside the foundation.
“The bulk of our success to date has been in Latin America,” especially in Uruguay and Peru, says Kane. By the end of this year, he says, Peru will have 600,000 XOs, while Uruguay will have 350,000. The maturity of the Latin American market—which he described as being in rollout mode, versus the seed stage—has spurred the OLPC to relinquish its management of programs in the region. “We’ve decided to, for lack of a better term, spin out that region and manage it out of Miami.” says Kane.
The spinoff into a separate entity is the first step in what Kane described as OLPC evolving into autonomous operating regions as XOs find success in different geographies. “I foresee OLPC from a sales and delivery standpoint as
