Cloud gaming platform OnLive reboots struggling model

The saga of handset vendor HTC’s poor investment choices took another turn Tuesday, when it emerged that US and UK cloud gaming service OnLive, which HTC has just chalked a hit of $40m up to, is in a worse state than previously thought. The company has just shed half of its staff and its stock has been acquired by a mysterious private investor, thought to be one of the original investors who backed the startup in 2009.

A tweet from the company said that service will continue 24/7 with more games to come. OnLive allows users to stream high end games from its data centre direct to their TV or PC using inexpensive customer premise equipment. Unfortunately all the cost is in OnLive’s hiring of data centre space and resources to run its services. It is believed that the company significantly underestimated the amount and cost of said resources, causing accelerated cash burn.

Under a Californian civil code invoked by the company’s CEO Steve Perlman, an ‘Assignment for Benefit of Creditors’ (ABC), allows the company to continue operations while being sold to a new owner. Unfortunately all those staff that had been awarded stock options as part of their original package are now holding worthless pieces of paper, and almost 50 per cent of them are now out of a job.

HTC has had a tough time with its investments of late. The company recently sold half of its 50.1 per cent stake in headphone maker Dr Dre’s Beats Electronics back to the original owner, less than a year after purchase, at a cost of $4.8m. And revenues for the Taiwanese firm dropped more than a quarter on a year on year basis for the three months to end-June, and HTC warned that they may fall yet further during the third quarter.

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