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BitTorrent has denied our report that the company laid off 12 out of 55 employees. That may be true: While our source told us 12 employees were on the layoff list, we've learned that, at the last minute, the jobs of two sales engineers, an HR manager, and an office manager were spared. Another tipster — "you can guess as to whether I'm an insider or not" — says that the BitTorrent layoffs aren't the fault of new CEO Doug Walker, who came to the those-crazy-kids file-sharing startup to add some enterprise-software gravitas. Instead, the elimination of BitTorrent's sales and marketing departments amounts to a coup by cofounders Bram Cohen and Ashwin Navin, pictured here to Walker's right and left, who are giving up on the notion of marketing BitTorrent's file-sharing technology to businesses and hardware makers, and instead pinning their hopes on becoming an "Internet peace corps."That's the second time I've heard that phrase from BitTorrent tipsters, so I'm guessing it's already widely used, if poorly understood, within the company. Anyone care to explain what an "Internet peace corps" is — and how this plan will pay back BitTorrent's investors, who have invested at least $24 million in the company? Our tipster also says Walker's trying to raise a third round of financing amidst this uproar. Here's his detailed recounting of BitTorrent's woes:

Owen- I read your posts on BitTorrent and here is my take (you can guess as to whether I'm an insider or not). I feel it boils down to two young and inexperienced founders, one a wanna-be Internet celebrity in Ashwin Navin, the other a reluctant Internet celebrity in Bram Cohen, wielding too much power over the company. They executed a coup that doesn't bode well for the new CEO staying much longer. Sound familiar? Torrent Entertainment Network Ashwin's grand idea that new CEO Doug Walker put the kibosh on may very well end up being sold to Best Buy, but nowhere near $15M (unless BitTorrent is incredibly lucky or Best Buy foolish). Best Buy's idea is to OEM a white box set-top TV box, put the Best Buy logo on it and bundle it with BitTorrent to download the content. This is what Ashwin dreamed of...sort of to do for movies what iTunes did for music; a seamless end to end solution for renting and buying movies online. Its just been poorly executed and with Apple TV nearing perfection, TEN will be an albatross with whoever ends up with it. BitTorrent is on the hook for licensing deals (that Ashwin's brother Alvir put together) that were not favorable to the company at all, especially since the store has not done well with consumers. Apple has more leverage here too. You've probably already heard the nightmares TEN has had with Windows DRM so I won't rehash it here. SDK Their SDK business was attractive to device manufacturers in part because of the ability to leverage the TEN. With TEN going away or at least changing dramatically, device manufacturers are not as excited to partner with BitTorrent. The FCC ruling that will likely force ISPs to cap bandwidth and charge for overage makes it that much worse. Why would Buffalo, D-Link, Netgear, etc want to bundle and pay royalties for the BitTorrent client on their device when their own consumers may end up having to pay more to their ISP for the behavior of that client passively sharing files? Talk about a tech support nightmare. DNA Probably the brightest part of their business, they had the model wrong. They were charging per GB to match CDN pricing schemes. What they should have done is given DNA away for free from the start and charge for the help and support people will end up needing (like what Red Hat did for Linux). Of course, BitTorrent had absolutely no post-sales support put together so even when the now laid-off sales and marketing team started to get traction in the market, supporting those customers became a headache. Not to mention that Eric Klinker and the engineering team had no desire to support what product marketing said customers were asking for. Mac client? Good luck...the engineer working on that left in May and they have no plans to pursue that project. Live streaming? Bram tried to figure this one out but gave up after becoming increasingly frustrated over not figuring out a way to make it work easily. Bundle the DNA client into the next release of uTorrent in order to propagate it? Too much of a sacred cow. They feel the uTorrent users would leave in droves if they were to do such a horrible thing as attempt to commercialize uTorrent. Seems like the solution here was to just let everyone in sales and marketing go to make the people causing these issues go away. At least they got to keep their laptops as a consolation gift. So now Doug Walker is left trying to cobble together a C round of funding as they desperately cut expenses. They are not renewing the lease on Floor 9 of 201 Mission St in December (rumor is Google is interested in the space, as well as several other floors in 201 Mission). 40 people in an office with room for 150 never does well for morale. Word is they are going to go back into stealth mode, turning into an "internet Peace Corps"...whatever that means. To me it sounds like they are turning into a non-profit which can't be attractive to for-profit minded investors. I'd hate to be one of their VCs right now.