Foundation 9 Entertainment has carried out cutbacks in response to the slowing market, closing its Fizz Factor studio and merging Amaze and Griptonite.
In a statement, the company confirmed that it is continuously monitoring its production capacity and capabilities to make sure they are in tune with the market.
"Itís important to F9 to remain a strong and profitable studio, so that we can continue to provide the best possible services to our publishing partners and employees," the statement read.
"From time to time we make decisions to grow or shrink capacity in relation to market conditions, and we do not make public comments on these decisions.
"We can confirm that we recently merged the operations of our two Kirkland studios, Amaze and Griptonite. Having separate 'console' and 'handheld' studios under the same roof simply didnít make sense in light of the convergence in capabilities of modern game hardware
"J.C Connors, studio head of Griptonite, will lead the combined studio. As part of that restructuring, and our normal practice of monitoring business conditions, we made the decision to close our Austin, TX handheld studio, Fizz Factor."
Cutbacks will also be made at Double Helix Games, VentureBeat has reported, and the company has said it will suspend matching payments to the company's retirement programme.
Foundation 9 is currently working on a number of key titles for assorted publishers, including, according to the report, Assassin's Creed: Bloodlines and Warner Bros' Where The Wild Things Are.
Software has suffered a slump in the US recently with NPD figures for June showing a 29 per cent sales drop on last year.