The struggling Internet company AOL plans to shed up to 2,500 jobs — more than a third of its work force — as it prepares to separate from Time Warner and finally sever their ill-fated marriage.
Major job cuts had been expected and seemed certain after Time Warner said last week that AOL would take US$200 million in charges for severance and other restructuring-related costs. But the magnitude was not known until Thursday.
AOL, which has already pared thousands of workers in recent years and now employs about 6,900, is asking for volunteers to accept buyouts. If it falls short of the 2,500 target, it plans layoffs to reach a payroll cut of up to 2,300 positions, a third of its current total.
The cuts will leave AOL at less than a quarter the size it was at its peak in 2004, when it had more than 20,000 employees.
The reductions show the Internet company is endeavoring to become lean as it leaves Time Warner’s side in three weeks. Yet it is still unclear how they will help AOL, which has been trying to reinvent itself as a content and advertising company amid an ongoing decline in its legacy dial-up Internet access business.
The voluntary offer is open to all employees from Dec. 4 through Dec. 11, AOL spokeswoman Tricia Primrose said. The job cuts still need approval from the new AOL board and come on top of about 100 layoffs announced on Nov. 10.
“We’re trying to put more choice and decision-making abilities in the hands of the employees, as opposed to having them wait for final cost recommendations or involuntary layoffs,” Primrose said.
Frederick Moran, an analyst at The Benchmark Co, said the cuts suggest tough times ahead.
“Obviously companies don’t make such massive layoffs unless their growth prospects are questionable, and that’s the biggest issue overhanging AOL — can it ever see its growth restored after years of deterioration?” he said.
The layoffs and the impending spinoff cap one of the most disastrous marriages in US 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.
It is not yet clear what AOL will slash if it doesn’t get the number of volunteers it seeks, though.
Some analysts expect cuts to come from the dial-up Internet access business, which currently has about 5.4 million subscribers, down from its peak of 26.7 million subscribers in 2002. Others expect AOL may use more freelancers to produce content on its stable of more than 80 free, ad-supported Web sites.
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