Sources have confirmed to us that Silicon Knights has apparently decided to scale back operations, and as part of this decision the company has let some of its employees go. The decision was made to allow the company to move to a core group focusing all of its efforts on future opportunities.

The interesting part of this is that the company claims that the rumors regarding the developers’ reliance on Nintendo are false. Nintendo is said to have dropped the developer following an unsuccessful bid to prevail in its lawsuit against Epic.

Despite all of the bad news, it is possible that an Eternal Darkness sequel might actually be in the pipeline as no one bothered to deny that this was the case. No numbers have been confirmed as to how many employees were let go, but we hear that it was not a large number.