ArsTechnica reports that

In an announcement posted to the OLPC wiki, Negroponte reveals that the organization will have to significantly scale back and cut costs in order to continue operating. The new budget constraints have necessitated major layoffs and pay cuts.

"Like many other nonprofits that are facing tough economic times, One Laptop per Child must downsize in order to keep costs in line with fewer financial resources. Today we are reducing our team by approximately 50% and there will be salary reductions for the remaining 32 people," he wrote. "While we are saddened by this development, we remain firmly committed to our mission of getting laptops to children in developing countries."

Another victim of OLPC budget cuts is the Sugar project, a Linux-based education software platform that OLPC developed for its laptops. This cut is unsurprising, because OLPC has gradually been moving away from Sugar and has increasingly sought to support Windows. It is still unclear whether OLPC will continue to encourage its large buyers to adopt Sugar, but Negroponte says unambiguously that the organization will be working on transitioning Sugar development entirely to the community.

The report goes on to describe the OLPC project’s “extreme dependence on economy of scale” as its Achilles heel.

The organization was not able to secure the large bulk orders that it had originally anticipated and fell short of meeting its target $100 per unit price. The worldwide economic slowdown has made it even more difficult for OLPC to find developing countries that have cash to spare on education technology. The latest restructuring effort could help OLPC regain its focus, but the failure of its past attempts to do so don’t really provide much confidence.

Hmmm… I’m sorry that they’ve hit trouble, but my sympathy is tempered by irritation at the way the project seems to be re-focussing on running Windows.