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AOL Cuts One-Third of Workforce with Buyouts
Andrew Vanacore
November 19, 2009
NEW YORK – AOL LLC, an Internet company struggling to adapt to an advertising-driven economy, is looking to shed as much as 36 percent of its work force as it prepares to spin off from Time Warner Inc. next month.
Major job cuts had been expected, but the magnitude hadn’t been known until Thursday. AOL, which now employs 6,900 workers, is asking for 2,500 volunteers to accept buyouts. If it falls short, it plans layoffs to reach a payroll cut of up to 2,300 positions, a third of its current total.
AOL hopes to trim annual costs by about $300 million. The job cuts still need approval from the new AOL board and come on top of about 100 layoffs on Nov. 10.
AOL spokeswoman Tricia Primrose would not say where the new cuts would occur or what positions they would involve. The company is based in New York but also has major operations in Northern Virginia.
The voluntary offer is open to all employees from Dec. 4 though Dec. 11, Primrose said.
Tim Armstrong, the company’s CEO, is also forgoing a bonus this year.
The layoffs and the impending spinoff cap one of the most disastrous marriages in U.S. corporate history. After being acquired by AOL in 2001, at the height of the dot-com boom, Time Warner said this week it will spin AOL off as a separate company on Dec. 9.
AOL’s legacy dial-up Internet access business has been fading for many years, and the company already had shed thousands of jobs as it pared down to focus more on producing content to garner advertising revenue. In 2004, AOL had 20,000 employees, nearly triple the current total.
But AOL had staggered in those efforts, even before the recession drove the advertising market into a slump. It named one of Google Inc.‘s advertising chiefs, Tim Armstrong, as chief executive this year to revive the business.
Armstrong has spent his first months at AOL visiting its employees around the world and scrutinizing its products to figure out where the company might shine.
The decision to shed so many workers shows the company is sticking to the strategy laid out by CEO Tim Armstrong earlier this year, Primrose said, which means focusing around AOL’s advertising, content, communications and local content businesses. Still, is not clear what AOL will slash if it doesn’t get the number of volunteers it seeks.
AOL’s operations still make money, but that profit has been falling. Nonetheless, AOL does have a few bright spots, including the popular tech blog Engadget and the celebrity Web site TMZ.com. TMZ, a joint venture with another Time Warner unit, Telepictures Productions, is often credited with being the first to report major developments including Michael Jackson’s death.
Time Warner has said that AOL will take about $200 million in charges for severance and other costs related to the restructuring.
Shares in Time Warner fell 88 cents, or 2.7 percent, to $31.94 in midday trading Thursday.
/text>© 2009, YellowBrix, Inc._ 
