My guess is that there have been long festering barriers in the company direction.

Let's lay out the cards:

Character Designer for HL2 and TF2, Hardware Designer, Director of BD, 3xSenior Animators, senior tech dev for HL2 ep1 & 2 and L4D, One of the original Portal devs, Senior QA and an Engine Dev...In a Jack Welch-esque move, Valve fired about 10% of their staff. Welch did this to eliminate the "bottom 10%". How employees are ranked depends on how you want to rank them. There are lots of senior old-timers in this list.

Valve hasn't been exactly putting out lots of their own games recently.

Maybe 1 game per-year? For a company of around 400 with essentially zero effort/free publishing model that's pretty poor.

Portal 2, while an excellent game, was not exactly the kind of AAA bit mover that a Half-Life game (on a new bloody engine) would be. And while it moved quite a few copies (something north of 4 million copies), NPD claims Mortal Kombat overtook it in week two of sales. At $20/copy Portal made about $80m. Not bad, but again, that's about a year's salaries. Let's also not forget that it's an IP that was introduced just a few years prior as a student project! (Halo 3 moved twice that many and Halo 4 has already matched Portal 2)

I may be living in a cave, but CS:GO isn't exactly lighting up the internet, and it's a sequel to a 12 year old game that was also one of their hottest properties. Why so long?

Valve is letting their most valuable IPs, HL and CS languish.

HL2:E2 came out 5 years ago. That's long enough to spin up a new game from scratch for a team of this size. HL2 proper is 8 years old.

Non-windows Steam software hasn't exactly been taking the world by storm.

If the numbers are right, between 25-30 employees, that's ~$5m-$6m/year savings, but against around $80m/yr in salaries is just a haircut.

Source is getting old. There's some engine devs that were cut there. I have a feeling HL3 and a new engine are caught up in sequelitis-ville someplace.

The Steambox is cool, but getting into the hardware console market is HARD. Like Elon Musk balls of molten iron hard. Turns out it's just a PC hooked to a TV with an expensive in-house controller to replace the 360 controllers everybody else is already using and happy with?Plenty of other folks are selling those, why take the business risk?

I feel like there's a pattern emerging, I don't think the decision was because of hard-times, but on frustration with corporate direction. Most of the people let go were pretty senior, killing off the old-timers is a time-honored way to move things forward. Hardware is a low-margin suicide business to get into, better to work with partners that'll take that risk and flood the market with fairly cheap, reasonably powerful consoles built with off-the-shelf parts. Moving to Linux kills off most of their library, and indie games aren't the money makers that Valve needs or wants. The "work on whatever you feel like" system hasn't turned out to provide the productivity or direction they want either.

Predictions:

1) Valve is going to build a new cross-platform engine, or modify an existing one (e.g. id Tech 5 or Unreal Engine). They needed to clean house to focus on this. HL3 will be the showcase for this engine. Anything less than 6-7 million sold across all platforms will be considered a disappointment. It'll quickly be followed by Portal 3 or possibly an all new L4D game built with the new tech. They'll refocus to releasing 2-3 games per year.

2) Valve is going to partner with hardware manufacturers for TV connectable PCs sold with dual stick controllers and perhaps a cross-license with the Oculus Rift as the market differentiator, this will ultimately be disappointing as traditional consoles will be cheaper and have better libraries for console gamers and PC gamers don't want to use a dual-stick controller.

3) Valve's ultra-flat org structure will not survive this.

4) Valve will not enter the mobile game market in any significant way. Their dev cycles are too slow, and he mobile market doesn't generate the kind of revenue they need.

5) Valve will stay independent, not looking to be acquired any time soon.