Varia Mobile has laid off a "substantial" portion of its staff as the Seattle developer of the Ibiza portable digital music player abandons the hardware business in the face of tough competition.
"Building a product to compete with Zune and Apple was an incredibly difficult proposition," said John McQueen, who spun the company out of AOL in 2007. McQueen said he's proud of the original device -- a WiFi-enabled MP3 player built in conjunction with Chinese electronics maker Haier and RealNetworks' Rhapsody music service.
The 30GB device -- which at one time cost as much as $330 -- got positive reviews for its technical specs from the likes of Engadget and Cnet.
But, at the end of the day, McQueen said the device just didn't gain traction with retailers who cut back on commitments when the economy turned south.
"It just became hard for us to execute against the harware business," he said. The company will continue to support the Ibiza Rhapsody device, though other products that were in the pipeline have been shelved.
McQueen declined to say how many people were let go, though sources say that about two-thirds of the staff lost their jobs after the cuts were announced last Thursday. About 10 people are left at the company, sources said.
While McQueen said it was a "hard decision" to exit the music player business, the company remains in business. And McQeen is bullish about Varia's prospects given its expertise in creating cutting-edge social networking and music applications for media players.
Varia will continue to pursue those opportunities. But instead of developing the software for its own devices, it now will create the services for other platforms such as Windows Mobile and Google Android.
McQueen said the company is simply trying to "reboot the business" as a software provider. And so far, he said they've received support from potential partners.
Originally started as Wildseed and backed by the likes of Ignition Partners, the company was sold off to AOL in 2005 and combined with the Tegic Communications unit in Seattle.
When AOL dismantled its mobile business units, some of the original Wildseed team purchased the assets in 2007.
McQueen said some of the core software developers remain. And he said the business has simply changed from when he helped get Wildseed off the ground nearly 10 years ago.
"We built our own Smartphone because there was nothing else to publish to," said McQueen. "Now, we realize we have to be excellent at software."
John Cook is co-founder of TechFlash. Follow on Twitter @johnhcook.
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