CrunchPad Crunched, Arrington Double-Crossed?

Just days before the launch of his portable Internet tablet, publisher and entrepreneur Michael Arrington said he was double-crossed by his Asian business partner and now the whole project has gone up in smoke.

Arrington, the founder of the news site TechCrunch, had a side project to create a tablet called the CrunchPad. He first discussed his plans in early July in the San Francisco Business Journal to work with a partner in Asia called Fusion Garage.

Arrington had hoped to launch it this year, preferably before Apple (NASDAQ: AAPL) comes out with its long-rumored tablet device. Now he won’t. In a posting on TechCrunch today, Arrington said the device was dead.

Three days before the planned launch, which was set for November 20, he got a letter from Rathakrishnan “Chandra” Chandrasekar, the CEO of Fusion Garage, who stated that after 1.5 years of development, Fusion Garage’s investors wanted to go on alone without Arrington.

“Bizarrely, we were being notified that we were no longer involved with the project. Our project. Chandra said that based on pressure from his shareholders he had decided to move forward and sell the device directly through Fusion Garage, without our involvement,” Arrington wrote.

He went on to say “Err, what? This is the equivalent of Foxconn, who build the iPhone, notifying Apple a couple of days before launch that they’d be moving ahead and selling the iPhone directly without any involvement from Apple.”

Arrington then admitted that neither he nor Fusion Garage owns the intellectual property (IP) of the CrunchPad outright. A spokesperson for TechCrunch declined to comment further.

That drew a pretty strong response from Ross Rubin, director of industry analysis at NPD Group. Rubin couldn’t believe that Arrington, a lawyer by education, let the IP of CrunchPad out of his hands.

“I can assure you that there is no confusion at Foxconn about who owns the intellectual property behind the iPhone,” he wrote in a blog post. “But the most surprising part is that Arrington, an attorney by trade, would be so careless as to leave so much of the IP in a gray area as to produce the squabbles that took down the CrunchPad.”

The promise of CrunchPad

The CrunchPad was to have been a touch-screen tablet designed for Web surfing and other Internet use and was designed with reader input. He did not give details, but the Singapore-based newspaper The Straits Times did. It profiled the small start-up called Fusion Garage that developed the device in conjunction with Arrington’s firm.

The CrunchPad would sport a 12-inch screen, run a 1.6GHz Intel Atom processor and a Web-centric browser operating system created by Fusion Garage and based on WebKit. The whole thing would be touch-driven, but it had no storage, not even flash. It was for connected use only.

Even without storage, keeping the price down seemed unlikely to Tim Bajarin, president of Creative Strategies. “The issue for the CrunchPad has always been the bottom line cost of goods, because his vision was to bring this in at $199 as I understand it. I work with ODMs in Taiwan and I know what the costs are of the components, and I always thought the original vision of $199 was almost impossible,” Bajarin told

Bajarin reserved judgment over the collapse of the deal since not all details are known, but he had a few thoughts on the subject.

“To be fair to Arrington, this was the first project of this nature, and when you are dealing with these kinds of companies overseas, there’s very tricky language. In cases where there are handshakes and signatures, there are things not implied in the contracts,” he said.

“Without knowing what went on in the original agreements, it’s hard to say [what happened]” added Bajarin. “You try to negotiate in good faith but a lot of the discussion doesn’t always get into the language of the contracts. So there is a trust factor that is part of the deal.”

Arrington said in his story announcing the collapse of the program that Fusion Garage had considered selling it on its own without him. Forget it, said Bajarin. “Arrington’s profile I always thought was critical. Without him it’s just another tablet. I think it’s disastrous for them in the long run,” he said.

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