The nonprofit OLPC initiative has faced its share of challenges in the three years since it was formed, with several production delays, complications in getting new deals and the resignation of three top executives last year amid differences in views about where the project was headed, but it looks like things have taken a considerably more drastic turn today.

Blaming the credit crisis, chairman and founder Nicholas Negroponte himself announced that the organization is cutting its staff by about 50% and giving the remaining 32 people a cut in pay as it refocuses its mission for providing computers to children in developing nations.

The group's restructuring will include a focus on the development of its second-generation XO laptop, a free connectivity program, the distribution of a million digital books, and handing off development of the Sugar user interface to the community. Negroponte also mentioned longer term plans to bring the cost of machines down to zero for the least developed nations.