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OnLive Entering A Form Of Bankruptcy
OnLive is not shutting down, as we reported yesterday, but it is entering a form of bankruptcy known as Assignment for the Benefit of Creditors, or ABC, that changes the structure of the company dramatically.
In summary, the company in its entirety is given to an assignee, be it a person, persons, or an entity, as a new company so that they or it can relieve the company's debt and make sure creditors are paid off. This is why OnLive saw a huge amount of layoffs yesterday. Some of those employees who were let go are being brought into the new company, but not everyone.
OnLive's CEO Steve Perlman said that much of the problems with OnLive came from the company's rapid expansion as a young company. OnLive is still new technology, and there was no way of knowing how many servers would be needed to run the network, so OnLive bought thousands of them, which all needed to be maintained. Perlman said, "If you've got 8,000 servers and 1,600 users, how could we ever get to cash flow positive, right?" The user-base simply hasn't caught up with the number OnLive was prepared to support.
Perlman recognizes the unfortunate current state of the company saying to his employees, "I'm the one that brought you here. I'm the one that ultimately made decisions. And I'm the one that ultimately takes responsibility. So I am sorry, and it didn't end up exactly as we'd hoped."
If you are a member of OnLive, the service will not stop. The restructuring and changes in management really only affect the behind-the-scenes of OnLive, so to speak.
[via Joystiq]
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