Confirming a rumor on Shacknews, a post on the Elemental Forums by Stardock's Brad Wardell says that the launch failure of Elemental: War of Magic has resulted in layoffs at Stardock, shedding some light on his comment that "the issue here is far far worse than many of you think it is." Word is:

It is true.

Elemental's revenue was anticipated to provide the revenue both for our main games team's next project as well as a second team. Unfortunately, that is unlikely to happen so we've had to start laying people off.

No one is being fired. None of these people did anything wrong. Stardock is a small company and each person here is truly amongst the best and brightest. So you can imagine how much it sucks for all of us to lay off anyone. We haven't had to lay anyone off since our migration from the OS/2 market in 1998. It would be great if we can bring as many of these people back over time if the studio can afford it.

No one involved on the core components of Elemental is affected.

Elemental's rocky launch can be summed up (IMO) as follows: Our QA process was insufficient to handle a brand new platform (Elemental = Kumquat 1.0 versus say Galactic Civilizations II was using Pear which was the same engine, modified, from 1997's Entrepreneur) + my own catastrophic poor judgment in not objectively evaluating the core game play components.