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curl-6 said:

Yeah, I'm aware of all this, I just forgot that Prime was out by the time Barcia was replaced by Kelbaugh.

I'm pretty sure production was well underway on Prime at the time of the embezzlement, layoffs, etc. Production on Prime began in 2000, and Jeff was kicked out with Nintendo's purchase of Retro in 2002, for instance.

I feel like I'm just dragging the thread off topic here though.

I still think the mass of those layoffs were due to the cutting of the 4 game projects and dissolving those 4 extra teams.  The embezzlement happening in the chaos of those changes.

The reports said that Retro had anywhere between 200 employees (source IGN) and 120 employees (source Kelbaugh) at the height of production for those 4 failed game projects.

The last of the 4 failed projects was cut at the end of July (19th) 2001, after which they solely worked on Metroid Prime.  9½ months later (May 2, 2002) Nintendo buys out Retro and replaces Spangenberg and 6½ months after that (November 17, 2002) Metroid Prime is released. 

From the credits for Metroid Prime it seems to show around 41 full time employees directly working on the game at Retro.  That makes me think going from 4 full teams to 1 team accounts for most of the massive drop in staff (200/120 to ~41).  

A lot of people were just let go after projects were terminated.