Rounding up trouble: OnLive, Hulu, Groupon

Break out the bubble-bursting talk, we’re rounding up some young companies in transition, in trouble or both:

• First, there’s the restructuring of Palo Alto online-gaming company OnLive, which on Friday fired many or all of its employees, according to various reports. As the Mercury News’ Troy Wolverton reported Friday and Sunday, the firings were part of a sale of the 3-year-old company to previous investor Lauder Partners. In a statement Sunday, the new OnLive called the asset sale “heartbreaking”; stressed that CEO Steve Perlman (of WebTV and QuickTime fame) did not receive compensation from the acquisition; and said that nearly half of the fired employees have been offered jobs as the streaming-game service continues to operate.

In addition, all previous investments in OnLive have been wiped out. HTC reportedly is taking a $40 million loss — not the struggling company’s first writedown, probably won’t be the last — on its gamble to grab a piece of the cloud-gaming market. Other burned investors include AT&T, Warner Bros. and Bay Area software maker Autodesk.

So what went wrong? Among the speculation: The company ran out of cash partly because of the high costs of its five data centers, according to DailyTech. And VentureBeat’s Dean Takahashi, who points out that OnLive was once said to be valued at $1.8 billion, writes that OnLive couldn’t boost its subscriber base (2.5 million users, according to the company) quickly enough. And that game publishers such as Electronic Arts were wary of the company being a middleman — they felt they could distribute their games online themselves.

• Speaking of streaming, Variety reports that Hulu CEO Jason Killar may be on his way out as parent companies News Corp. and Disney proceed with their plans to revamp the video-streaming company. Variety says Killar may want to go after what is said to be a payout of $100 million coming his way. Well, that, and perhaps to get away from the watering down of Hulu, because from what Variety says, the revamp will strip the service of content-exclusivity deals and the one-stop shop feature that have made it a leading attractive supplement or alternative to cable TV since its U.S. launch in 2008. But hey, the parent companies are said to be keen on pushing Hulu Plus, the paid subscription service, as well as more ads.

• Finally, there has been much written about Groupon’s recent troubles, including its disappointing earnings report less than two weeks ago, which pummeled its shares. Now the Wall Street Journal writes about some investors who have “given up” on the Chicago-based daily-deals provider. They include Silicon Valley star Marc Andreessen and his venture firm, Andreessen Horowitz, which in June sold its 5.1 million shares in Groupon, making a profit of about $14 million.

Groupon, whose business model has been questioned and whose accounting practices have drawn scrutiny, is seeing its shares rise sharply today amid a mostly down day for tech stocks. They are up more than 2 percent to $4.85 as of this post, after hitting a record closing low of $4.75 last week. The company went public in November with an initial trading price of $20.

But Kleiner Perkins Caufield & Byers has hung on to its Groupon investment, with partner Mary Meeker saying last week that “Groupon has materially exceeded our expectations in nearly all key business drivers,” according to the WSJ. Business Insider’s Henry Blodget cites this as an example that Kleiner Perkins has “lost a step,” pointing to its late-stage investments in Facebook and Zynga, too.

The two social companies have so far been big duds on Wall Street. Earlier today, Facebook shares hit a record low for the third straight trading session. They’ve since recovered, and are up nearly 4 percent to above $19 — $19 is half their May IPO trading price — as of this post.

 

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