UPDATE: Here's Activision's statement on the matter:
Although we made a substantial investment in the Prototype IP, it did not find a broad commercial audience. Radical is a very talented team of developers, however, we have explored various options for the studio, including a potential sale of the business, and have made a difficult conclusion through the consultation process that the only remaining option is a significant reduction in staff. As such, some employees will remain working for Radical Entertainment supporting other existing Activision Publishing projects, but the studio will cease development of its own games going forward.
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Radical Entertainment appears to be no more.
A tweet from studio audio director Rob Bridgett made a brief but damning comment this afternoon.
“RIP Radical Entertainment 1991-2012,” said Bridgett.
This arrived amidst a series of rumors regarding the fate of the studio today.
The last game Radical worked on was the not-so-warmly received Prototype 2. Oddly enough, Radical Entertainment was mentioned in a press release just two days ago, having just implemented Hansoft’s production tools.
Activision has yet to comment on the news.