Big guns such as Intel's chairman at the time, Craig Barrett wanted to ignore the netbook category, dismissing the OLPC "gadget" as unusable. Of course the original spec called for an AMD processor rather than one from Intel. Intel would eventually become a supporter of the project.
Microsoft's Bill Gates dissed the netbook, saying smartphones connected to televisions would be a better idea. Of course, the OLPC's original specification also included Linux, rather than Windows, as its base operating system. Eventually, Windows XP would be offered alongside the slimmed-down version of Linux Fedora, called Sugar. By 2008, the first copies of the OLPC XO-1 were rolling out. It's up to 1.75, as of this writing.
The market change
The OLPC design, and its descendent— the netbook— was viewed as some sort of proletariat uprising that privately must have made big hardware vendors giggle. No, they said, we're not jumping into the OLPC and netbook market—it's not worth our time. Intel would eventually join the bandwagon, but was perceived by many initially reacting and reflecting US notebook makers. Nonetheless, the feature set inspired Taiwanese and Chinese computer companies lusting for new markets to bring their ideas to market. Their engineers went to work—after all, most all of the world's notebooks are made in Taiwan and China, and they're likely to have lusted after market growth that wouldn't have to pay a tax to their OEM clients like HP, Dell, and IBM.
Even today, notebook retailing is a matter of dominating sales channels. Large hardware vendors like HP and Dell have product lines whose features are divided into perceived business and personal computing product lines. Differing brand names are used to differentiate how models are ostensibly poised, so as to help customers self-identify with feature and service sets.
In turn, big-box retailers use displays of graduated price models that in turn reflect ostensible feature sets into classes of target markets, such as the biggest notebooks as reflected in the desktop replacement market. The OLPC and netbook designs fell conveniently underneath the existing brands and target models within the brands.
Netbooks were comparatively bereft of popular notebook features like built-in DVD drives, large and bright displays, special graphics chipsets, high-capacity hard drives, memory card readers, and the plentiful number of port jacks usually found on larger machines. More importantly, however, the low price of netbook hardware was difficult to ignore.