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AOL to cut quarter of work force

In general, massive layoffs are expected as AOL stops actively marketing its dialup services in the United States and reduces its need for customer-support centers.

By ASSOCIATED PRESS
Published August 4, 2006

NEW YORK - AOL will shed as much as a quarter of its global work force within six months as the company seeks more than $1-billion in savings to offset its decision to give more services away for free.

Some employees in Europe will still have jobs but with a different company as AOL looks to sell its Internet access businesses there. But in general, massive layoffs are expected as AOL stops actively marketing its dialup services in the United States and reduces its need for customer-support centers.

AOL will no longer produce and distribute trial discs that often come unsolicited in mailboxes and magazines. Employees who do those jobs will likely be laid off.

AOL also will not get as many customer-service calls, because live support is available only to paying subscribers, many of whom will cancel and accept AOL's offer for free e-mail and software. AOL will likely shed jobs there, too.

All told, the Time Warner Inc. unit formerly known as America Online expects to drop as many as 5,000 employees from its payroll, out of a global work force of 19,000.

"It sounds like the first shoe's falling," said David Hallerman, a senior analyst with research company eMarketer Inc. "It's clear that's part of a large savings that AOL is going to have to go through. The biggest cost in any business is employees."

AOL currently employs about 5,000 in northern Virginia, where the company has its headquarters. About 3,500 are in Europe and 4,000 are elsewhere in the United States.

The company did not say where the job cuts will be, adding that individual employees likely will be notified in late September or early October.

The changes are coming not only because AOL plans to stop aggressively marketing its dialup service, but also because it will end its practice of charging high-speed Internet users for access to its content and services, such as e-mail and parental control software.

Layoffs had been anticipated. In announcing AOL's strategy shift, Time Warner said it expected to spend $250-million to $350-million through 2007 to implement the changes, about half of that for employee severance.

Time Warner and AOL executives also said they expected to save more than $1-billion by the end of 2007 by cutting marketing, network and overhead costs.

[Last modified August 4, 2006, 06:38:41]