OLPC Profit: $8 Million Per Order?


Yesterday, Tim Li, CFO of Quanta Computer, the Taoyuan, Taiwan-based original design manufacturer of the One Laptop Per Child 2B1 Children's Machine, estimated that Quanta’s sales for the project will be as much as $1.3 billion next year in a short Bloomberg interview focused more on its overall plans for the Changshu factory that Quanta will lease for OLPC 2B1 production.

8 million reasons to smile

Earlier Quanta Computer President Michael Wang announced a 12-month shipment goal of 10 million OLPC laptops, and if we doi the simple math, that comes out to $130 dollars per laptop.

Now let's go to Nicholas Negroponte's "AMD Global Vision Conference" presentation and see what his most recent price quote would be:

The anticipated price for the 2007 model is $138, going to down to $100 by the end of 2008 and getting to $50 in 2010, Negroponte said.
Again, if we do simple math on the first batch of sales, OLPC will have an $8 margin on every laptop sold. $8 doesn't sound like much, right? And who could disparage One Laptop Per Child for making back some of the $30 million it's spending on laptop design?

Here's one last math calculation for you: $8 x 1 million units per order = $8 million dollars per order.

Now that is a nice little income stream for a nonprofit with nine principals listed on its website. Yes, there are more employees, all collecting paychecks, and there is rent and all the other costs of doing business, but if OLPC and Quanta Computer hit their 10 million unit sales projection, that would be $80 million dollars of income in a single year.

And didn't Walter Bender just say:

"One Laptop Per Child is a nonprofit association. Our mission is to get laptops to children. We sell laptops at cost, so whatever they cost, they cost."

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Wow, this is awful reporting. You're taking figures given by different people at different times that are obviously estimates, and claiming that "doing the simple math" and coming out with an $8 discrepancy leaves you with something that discredits a recent public statement that the laptops will be sold at cost, rather than with facile nonsense.

Why not just ask someone at OLPC whether they will be making profit on the laptops before posting such an article? They have press contact details on their site.

Three people say three numbers about one product. It's called "connecting the dots" when you apply simple math to all three statements. Maybe I am off by 20%, or even 50% - that is still a magnitude of millions of dollars, or a great income stream for a small nonprofit.

I am not against OLPC making money. Nonprofits are businesses too and they need viable income streams to survive. Question is, "How much an income stream?" when they promise to sell millions of units at cost.

I'd have to agree with the first poster. You shouldn't really call this a "news" site since you are both so obviously bitter about this project. I appreciate some honest skepticism, but what is your deal?

I can't beleive you are critizing One Laptop Per Child. Because criticising this project is like criticising the church, or the Red Cross.

I agree with the first poster, the price numbers are still in flux. The 130 and 138 dollar numbers are probably just two different guesses as to the final price. They haven't made some final design decisions, and the cost of RAM, flash, etc. change constantly.

Also I think that Dr. Negroponte said OLPC would make no profit on the laptops. They are funded entirely by donations from AMD, Google, etc.

I agree with the first poster - this is a very bad piece of writing for such an important project. Do you really believe OLPC is all about greed? Personally I don't care if some people make money if there's going to be laptops in the hands of millions of kids. As a teacher I would love to trial this with my class as I have reason to think computers for every child would be the best thing to happen to education, since, well, ever.

Let's not criticize this because it's a good idea. Let's just let them do what they want because I will get a cheap laptop for my child. Blah Blah Blah.

Nonprofits make money. Some make lots of money. Some, like the Red Cross or the Church make crazy money. And squander it. The Red Cross head had to resign after her bungling of the 9/11 money. Churches regularly make the news with financial scandals.

One laptop is a great idea. That doesn't exempt them from questions about money. Millions of these laptops means millions of dollars. They don't have to pay tax on those millions. We have a right to know the income. Kudos for the question. How much profit?

I think Negroponte has alread said that the price of the laptop will float based on the price of the components -- the only fixed aspect is that OLPC won't be making anything per unit. I'm guessing Quanta will be making money, among other component manufacturers. Flash prices are fairly volatile. The price of many materials is fairly volatile. So you can't just do the math based on numbers from different sources and different times and expect it to all come out correctly.

Yet another grudge piece.
I guess anything that adds up to Negroponte being evil is good enough for you.
Seriously, I think Negroponte is a bit of an egomaniac and "Being Digital" was kind of dated when it came out, but if he wanted to make lots of money I can think of at least 100 ways that he could more easily do it.
Why not just focus on the REAL shortcomings, in a somewhat balanced way, if you really believe it is not a worthy project, rather than trying to spin everything to death.

Hey Man, have you ever heard of shipping? How do you think those taiwan made laptops are gonna get distributed? Stop and think for a moment before you write poorly founded criticism.


International sea-freight shipping costs will be less than a rounding error on the total cost.

How? See Ethan Zuckerman's calculations that its $.21 per bottle to ship Fiji brand bottled water to Cambridge Mass. http://www.ethanzuckerman.com/blog/?p=669

Laptops from China to anywhere would be comparable, less than $0.50 in shipping per unit.

Your figures are wildly inaccurate, since they are based on highly preliminary estimates. I don't know whether OLPC will sell its laptops literally at cost, or whether it will make millions of dollars per order. Ask them.

But you are confused about the nature of a non-profit corporation under US law. There is no legal or moral requirement not to make money. What is forbidden is having shareholders who collect dividends out of the profits. OLPC clearly follows the rules here.

Now let's consider what can be done with profits from Laptops. As you said yourself, there are ongoing costs. There are also

* costs to license textbooks, fonts, and other Intellectual Property for free distribution under Creative Commons licenses worldwide (only Free Software will be used)
* costs to develop the next generation Laptop and its successors
* costs to develop really effective educational software
* costs for research and monitoring on the program in various countries, to improve educational outcomes, prevent theft and corruption (such as charging families for the laptops) and so on

So there is nothing wrong that I can see with OLPC making tens or even hundreds of millions of dollars, as long as the profits go back into work directly benefitting the children.

So what's your real gripe about the program?