The world’s largest manufacture of computer processors, Intel, has cut ties with One Laptop Per Child, a non-profit that Birmingham Mayor Larry Langford wants to provide computers for Birmingham K-8 students. The split comes after Intel refused to discontinue its Classmate PC, a bare-bones laptop designed for students in developing countries. OLPC founder Nicholas Negroponte has said that the Classmate competes with its XO laptop (sometimes referred to as the “$100 laptop”) and that Intel is deliberately undermining the non-profit’s altruistic mission.

After taking office last fall, Mayor Langford announced a plan to buy 15,000 of the XO laptops for about $200 per unit. Like many of Langford’s ideas, the plan is nebulous and details are scarce. However, after meeting with OLPC officials last month, the city did sign a memorandum of understanding with OLPC. Langford has said that the XO laptops will be distributed in mid April.

In 2005, Negroponte and a group of MIT developers announced their ambitious project to put cheap laptops in the hands of children in developing countries, even in places that lacked electricity. Using rugged components, proven technology and an economy of scale, OLPC seemed on the verge of changing education throughout the world.

The only problem was that the idea might have been too good for the for-profit sector to forgo. The XO laptop uses a processor produced by AMD, Intel’s chief competitor, and an open-source Linux-based operating system, instead of Microsoft’s Windows. Several countries initially agreed to buy millions of the tiny green laptops, but those agreements began to fall through after Intel introduced the Classmate.

At $300 per unit, the Classmate is slightly more expensive than the $180 XO laptop, but it uses Intel processors, Windows XP and a basic version of Microsoft Word. (For a more detailed comparison, click here.)

Negroponte accused Intel derailing OLPC’s mission because of greed, but early last year, Intel and OLPC agreed to make nice and be friends. Intel would donate $18 million to OLPC, and OLPC would give Intel representation on the non-profit’s board.

The truce was troubled from the start, as the Wall Street Journal reported last November, and Negroponte’s vision of 100 million laptops in 2008 had turned into a meager order of 300,000.

But the deal-breaker seems to have occurred last month, when an Intel saleswoman tried to persuade the government of Peru to buy Classmate PCs instead of the XO laptops. According to a report in Saturday’s New York Times, Negroponte gave Intel an ultimatum to stop selling the Classmate. Instead, the company withdrew its support for OLPC and severed its ties with the non-profit.

It is unclear if the schism will have any effect on Birmingham’s plans to use the laptops in city schools, or whether the program will suffer the same fate as Langford’s past project to give computers to kids.