Ensemble Studios boss Bruce Shelley said he was shocked when Microsoft decided the developer would close following the completion of its work on Halo Wars.
"I have mentioned with regret the closing of several quality game studios over the past several years but I never considered that Ensemble Studios would join the list," wrote Shelley on the company blog.
"Everyone at our studio was shocked, and I think remains very disappointed that this is going to happen. I believe we thought we were immune to shut-down talk because our published games have done so well and have been so profitable.
"Plus we felt we had built a really stable (low-turnover), talented, hard-working, and creative team, which is not easy to do. We thought we were among the best studios in the world, and that may be true, but we don't fit in the future plans of MGS as an internal studio, so we're out," said Shelley.
Microsoft decided to shut down the Age of Empires team earlier this month. Shelley believes this may have been because Ensemble was more expensive to run than other internal Microsoft Game Studios such as Rare and Lionhead.
"First, they want to divert the headcount tied up in Ensemble Studios and the costs that are expected to be required to run Ensemble Studios for the next few years into other projects," he said.
"Second, it sounded like it cost more to run Ensemble Studios on a per person basis than other first party studios, putting us at a disadvantage.
"And third, games those studios are expected to deliver in the next few years are expected to be more strategic and profitable to the company than anything we would be finishing after Halo Wars," added Shelley.
Halo Wars is due for release in early 2009, with Ensemble determined to making the game its swansong.
"We want a great Halo Wars game to be the final tribute to everything that Ensemble Studios has come to mean to us, and perhaps you as well, over the past 13 years," concluded Shelley.