Rumors swirl over OnLive as employees leave with packing boxes

Rumors over the fate of cloud gaming service OnLive swirled on Friday afternoon after reports the company had fired most of its staff. OnLive is being coy about its business situation, but on Friday afternoon several employees were seen leaving the Palo Alto-based company carrying packing boxes.

First reports of problems came, as so much does these days, on Twitter when Brian Fargo of InXile Entertainment tweeted "Their employees are sending out emails that OnLive will be closed by the end of the day."

The tweet was quickly picked up by Mashable and spread across the web.

At 4pm an OnLive spokeswoman told reporters waiting outside the company's headquarters that a statement would be "soon," but as of 4:45pm it had yet to appear.

Around 2pm some employees were seen leaving the building carrying packing boxes. Others entered and still more could be seen inside but no one had anything to say.

One person entering the building, when asked if he worked for OnLive, paused apparently unsure of how to answer the question, then said "Kinda ... sorta." He declined to say anything about what staff had been told.

One woman, a box in her arms, stopped as she left the building to say goodbye to a colleague who was entering.

A large pile of moving boxes sits in the building's basement parking garage.

OnLive operates an on-demand video gaming service that streams games to users via a TV adapter. The company runs the games on its server in the cloud so users don't require complex gaming hardware at home. OnLive's backers include Warner Bros., Autodesk, Maverick Capital, AT&T, British Telecom and The Belgacom Group.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com