As Nicholas Negroponte stormed the developing world trying to drum up buyers for the innovative $175 computers designed by his One Laptop Per Child (OLPC) education nonprofit, he encountered a persistent obstacle: competition from Intel Corp.

Intel’s chairman, Craig Barrett, had derided Negroponte’s machines as mere gadgets. And Intel was signing up international governments for its own line of low-cost PCs, called Classmates, which follow more conventional computing designs than OLPC’s radically rethought “XO” computers.

Negroponte was suspicious of Intel’s motives, since the XO runs on processors from Intel’s fiercest rival, Advanced Micro Devices Inc. Negroponte said Intel had hurt his mission and “should be ashamed of itself.”

But in recent weeks, Negroponte and Intel CEO Paul Otellini began peace talks, culminating in a face-to-face meeting on July 12 at Intel headquarters in Santa Clara, Calif. And on July 13, the two sides said they had joined forces: Intel will join OLPC’s board and contribute money and technical expertise to the project.

Intel will continue to sell the Classmate, which has fallen in price from about $400 to the low $200s, attracting buyers in Pakistan, Brazil, Mexico, and Nigeria, according to spokeswoman Agnes Kwan. And OLPC still hopes its machines reach schools in several countries this fall.

But now, Intel and OLPC might seek ways to package their computers together. For example, Intel’s Classmate, which has to be plugged in, might be an option for governments to deploy in urban schools, while the XO laptops, which use very little power and can be mechanically recharged by hand, could go into rural districts.

“There are an awful lot of educational scenarios between K and 12,” said William Swope, Intel’s director of corporate affairs. “We don’t think all those are going to be served by any one form factor, by any one technology, by any one product.”

Walter Bender, who oversees software and content for OLPC, said his Massachusetts Institute of Technology spin-off would benefit from the addition of Intel’s technical expertise. OLPC expects to be constantly trying to perfect the XO machines–and get their cost closer to the originally stated goal of $100.

“It’s a big problem, more than 15 people at OLPC can do all by themselves,” Bender said. “Getting more talent lined up to help us is only a plus.”

At least the initial wave of XO computers will still use processors from Advanced Micro Devices. AMD has been a major partner in OLPC, along with such other big names as Google Inc., News Corp., and Red Hat Inc.

But without a doubt, Intel would love to oust AMD as the processor supplier. After all, that is Intel’s core business–not selling low-cost computers.

“We’re going to go compete for the XO business, because we think we build first-class silicon,” Swope said.

AMD’s liaison to the OLPC project, Rebecca Gonzales, said she welcomed Intel’s involvement. “As a partner with OLPC, we support them in their mission, and if Nicholas believes this is part of the mission and this is what is going to be best for OLPC, we will go along with them,” she said.

Several countries have expressed interest in the $175 laptop, but OLPC’s leaders have backed away from predicting which governments will be first to officially sign contracts to buy the machines. The project needs orders for 3 million laptops before its low-cost supply chain kicks into action.

“We’re definitely going to be doing stuff in South America, Africa, and Asia right from the very beginning,” Bender said.

One possible selling point for the Classmate, at least for some buyers, is that it can run a version of Microsoft Corp.’s familiar Windows software in addition to the open-source Linux system. The XO uses a homegrown, open-source setup that avoids windows, folders, and other familiar formats in favor of a new approach designed to be intuitive to children.

Microsoft has been working to get Windows to run on XOs. But it still doesn’t appear that will be ready soon, according to Will Poole, who heads Microsoft’s emerging-markets group. The main reason is that it is hard to tweak Windows so it can interact with the nonstandard things that make XOs innovative, including their display and power-saving technologies.

Links:

One Laptop Per Child
http://www.laptop.org

Intel’s Classmate
http://www.intel.com/intel/worldahead/classmatepc