OnLive reportedly hit with mass layoffs, possibly filing for bankruptcy (updated)

Supposed employee e-mails point to mass layoffs of cloud-based gaming company OnLive.

Cloud-gaming company OnLive is rumored to have been hit with layoffs today, according to veteran video game developer Brian Fargo, who says he's received communication from a former employee warning of the company's demise.

According to an email forwarded to Polygon from an anonymous, supposedly former OnLive staffer, the company will "no longer exist" as of today.

"I wanted to send a note that by the end of the day today, OnLive as an entity will no longer exist," reads an email forwarded to Polygon and later tweeted by Fargo. "Unfortunately, my job and everyone else's was included. A new company will be formed and the management of the company will be in contact with you about the current initiatives in place, including the titles that will remain on the service."

Fargo later tweeted that the original message was recalled by his source.

The OnLive employee has sent a "recall" message on the email. Now what does that mean?

— Brian Fargo (@BrianFargo) August 17, 2012

A follow-up tweet from Zen Studios' Mel Kirk indicates he received a similar email.

@polygon Got the same mail followed by "recall" from the sender. Makes me think it was calculated move for attention - acquisition to come??

— Mel Kirk (@crackervizzo) August 17, 2012

According to a report on Mashable, layoffs have affected the entire staff. A separate report on Game Front says "the whole company, (minus some key upper management, details still not known), has been let go."

The company's official Twitter account is currently still tweeting, with no indication that there are troubles at the company.

"We don't respond to rumors and have no comment," said an OnLive representative when asked for clarification. A statement from Brian Jaquet, OnLive's director of corporate communications, refutes allegations that the company is folding, saying "We don't respond to rumors, but of course not."

"I have no comment on the news other than to say the OnLive service is not shutting down," Jaquet told Polygon when asked specifically about layoffs. "I'm sorry I cannot be more specific." In a separate statement, Jaquet emphasized to Forbes "We are not going out of business."

OnLive was first unveiled in early 2009, promising cloud-streaming of video games to consoles and PCs that offered gameplay independent of hardware capability. The company announced a partnership with open source console Ouya in July to bring its cloud-based gaming service to the platform.

Update: According to a report on Kotaku, OnLive is planning to file for bankruptcy. OnLive CEO Steve Perlman reportedly told employees "the company as it stands now would cease to exist and that no one would be employed by OnLive."

A report from TechCrunch also suggests that layoffs are the company's way of "cleaning house" in preparation for a buyout. A source says that the buyer wanted to own the company and its services without worrying about potential liability, patents, and equity. Engadget partially corroborates the story, saying some employees who avoided being laid off received new offer letters from another company."I think because nobody knew how to react, everybody clapped."

Engadget and GamePolitics also describe a sudden all-hands meeting in which employees were notified that they would be laid off with no severance pay. Sources tell GamePolitics that budgets were tight before the announcement, and that the company is filing for a form of bankruptcy that allowed for some protection from creditors. A few people have allegedly received one-month job offers from an unknown party. The news still took employees by surprise, however. "I think because nobody knew how to react, everybody clapped," the source said. "It was bizarre... because you're clapping to thank him for taking the easy route out of the company."