Rumors over the fate of cloud gaming service OnLive started on Friday afternoon after reports the company had fired most of its staff and wil operate under a new under a new owner. Onlive employees were reportedly seen leaving the Palo Alto-based company carrying packing boxes Friday afternoon.

In another report, OnLive has been acquired by a new owner - a move that meant an unknown number of staff were laid off, although the company pledged to continue its operations.

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. The streaming video game service is based around powerful servers that streams games to TV adapters in the homes of its users. According to otehr reports, the number subscribers to the service was not big enough to cover Onlive's huge demand for server infrastructure.

All the above remain rumors until Onlive provide an official statement.

OnLive's backers include Warner Bros., Autodesk, Maverick Capital, AT&T, British Telecom and The Belgacom Group.