Cloud gaming service OnLive faced a wave of controversy over the weekend, with reports indicating massive layoffs. OnLive has been acquired by another company, and according to new reports that company will trade using OnLive's name. All assets except shares and staff have reportedly been transferred; some of the staff will be hired back, but more than half will be left out of the transaction.

OnLive will reportedly continue to operate without any issues for end users.

"Asset acquisition, although a heartbreaking transition for everyone involved with OnLive, allows the company's core innovation and ongoing offerings to survive and continue to evolve," the company said in a statement.

Employees left without a job will be offered consulting roles, and the company plans to hire back more of its former staff once it secures more funding.

Employees, however, are not the only ones affected. HTC invested $40 million in OnLive in February 2011, and it will now lose out on that investment. OnLive applied for "asset restructuring" shortly after Sony bought its main competitor, Gaikai, for $380 million.

"Due to lack of operating cash and inability to raise new capital, OnLive had completed asset restructuring over the weekend. HTC estimates that it will need to recognize a $40m provision for this investment loss," HTC said in a note to investors. The news come as yet another blow for HTC, which has also been facing financial trouble in recent months.

Lack of sales in South Korea and Brazil prompted HTC to pull out of both markets, and its second quarter financial results are troubling. HTC reported profits 57 percent lower than the same period last year, with a net profit of roughly $248 million overall. Revenues for July 2012 were also down 45 percent from the same period in 2011.

Moreover, the cloud gaming service is not the only disappointing investment HTC made recently. Last year, the company poured $300 million into the Beats Electronics headphones outfit, only to sell back half of that stake back in July this year, taking a $4.8 million charge. News of the OnLive loss drove down HTC shares in Taipei 3.8 percent to 240.50 New Taiwan dollars (US$8.01), and the benchmark Taiex was down 0.4 percent.