Explosive growth can't be maintained forever. All those employees you needed to manage a meteoric rise just become financial burdens when your company begins to stabilize.
Layoffs are a shame and suck for everyone involved, but it's not always an indication that the business is failing, but rather that the business is settling in.
Even a growing company (like PopCap) can still have a layoff be a good idea for business. Their main reason they cite is that the business model is changing. This is phenomenally important.
If Kodak had laid off three-quarters of its film staff and hired like crazy to get into the digital business back before digital cameras were a hit, they would have been crucified by the city of Rochester and in the court of public opinion. In hindsight, though, it would have been a smart decision and one that could have saved the company.
If your people can't adapt to the market, you need to change your people. It's an unfortunate reality, and it sucks for all involved, but good businesses make hard decisions like this. I hope things work out for PopCap, and my heart goes out to those laid off--life is about to really suck for them.
I don't think this is going to kill off PopCap, and I agree that layoffs are a part of business. My point was that, for every PopCap laying off some employees, there are 10 sub-par studios going to be forced to downsize or close due to the same market conditions.
Then again, I don't think anyone who followed this space closely didn't see this coming. The industry is maturing. If it frees up some developers to do (in my opinion) better work, that's a "good thing".
Layoffs are a shame and suck for everyone involved, but it's not always an indication that the business is failing, but rather that the business is settling in.