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Libyan leader Muammar Gaddafi has dealt a blow to the One Laptop Per Child Foundation’s efforts to begin mass production of millions of notebook computers for poor children in developing countries around the globe.

Last year, as formal ties between the United States and Libya were restored, OLPC Foundation founder Nicholas Negroponte announced that Gaddafi had ordered 1.2 million of the devices, making him the non-profit group’s first major customer.

Last week Nicholas Negroponte told Reuters in an exclusive interview that the Gaddafi Foundation had cut its order for the inexpensive laptops by 700,000 units to 500,000, possibly delaying the launch altogether.

Gaddafi’s decision to more than halve his order means that Negroponte is scrambling for business in other countries around the globe. 

Negroponte didn’t give a reason for the change. But the dropped order came as the laptop’s price rose to $176 – from an original target of $100.

Nicholas wasn’t the only Negroponte, who was disappointed by Gaddafi. Earlier this month his brother John, who is a U.S. deputy secretary of state, traveled to Libya as the highest-ranking American official to visit the country in half a century. But he left without meeting the Libyan leader.

Prior to his trip U.S. senators had urged Negroponte to hold Gaddafi responsible for “acts of terrorism” during his visit.

Without those 700,000 laptops, Negroponte estimates that only about 2.5 million orders will come in. (That’s only an estimate because he won’t formally start taking orders until next month). 

Economies of scale require Negroponte to produce at least 3 million of the devices in their first run. Otherwise he’ll have to postpone their launch. So he said he’s going to spend the next month traveling the globe trying to drum up business.

Negroponte said that one option would be to sell the laptops to impoverished school districts in the United States, reversing a policy that he’d never give American youngsters access to the devices. 

Here’s an excerpt from the interview, which was conducted after an analyst briefing on the project. Transcripts of that briefing are available at the Website of OLPC News.
(Reuters coverage of the project)

Updates with links to Reuters coverage and OLPC News