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The agreement marks Intel's biggest order for the Classmate to date, and will also see Intel take up a post as technological advisor to Portugal's Ministry of Public Works, Transportation and Communications, which is overseeing distribution of the laptops.

Parents can choose between a Windows or Linux operating system for the Classmate, which will be distributed to students over the course of the 2008-2009 school year.

"This new collaboration with Intel underscores Portugal's commitment to advance quickly toward a knowledge-based economy," says Portugal's Prime Minister, Jose Socrates.

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"By equipping our schools with state-of-the-art computing technology and internet connectivity, we hope to hasten the transition to economic models that benefit our citizens."

The deal is a another blow to the One Laptop Per Child organisation, which despite being established with a similar mandate has struggled with numerous setbacks since launch and is reported to have sold only 600,000 of its XO laptops since launch.

The relationship between OLPC and Intel has been notoriously difficult in recent years, with the two struggling to find common ground on the best way of spreading low-cost computing. Whereas OLPC seeks to consolidate the market and offer a single product in bulk at a cheaper price, Intel prefers the idea of competing technologies for different market segments.

This ideological split led to Intel walking away from the OLPC board in January, followed by a parting blast from Nicholas Negroponte who claimed "over the entire six months it was a member of the association, Intel contributed nothing of value to OLPC."