SCI Entertainment, the owner of the Tomb Raider games, has announced steep losses and a major business revamp.
SCI bought Lara Croft-owner Eidos in 2005
The computer games maker said losses in the six months to the end of December were £81.4m ($161.6m) compared with a £17.9m loss a year ago.
New chief executive Phil Rogers cancelled 14 projects and announced 260 job losses - 25% of the firm's staff.
He also said the revamp could cost up to £55m and added that it might have to sell shares to cover the cost.
Shares in the firm plunged 22% after the announcement.
"Our quality has slipped below acceptable standards," the company said in a statement.
"Through disappointing game development and working within an ineffective operating structure, we are failing to realise the commercial return our creative ability."
Mr Rogers took over from the company's founder, Jane Cavanagh, who resigned in January.
The company has been battered by poor results, failing to deliver new games on time and the collapse of takeover talks.
SCI hit trouble last July when it warned that profits would not meet expectations.
It began talks with potential buyers in September, but in January announced those discussions had collapsed.
It also delayed the release of four new games until the final three months of 2008, including the postponement of the latest in the Tomb Raider series.
SCI bought Eidos, the owner of Tomb Raider and its heroine, Lara Croft in 2005.