Thursday November 19, 10:45 PM
AOL to shed 2,500 jobs as spinoff from Time Warner looms
NEW YORK (AFP) - Former Internet star AOL (NYSE: TWX - news) said Thursday it is to slash 2,500 jobs, one-third of its workforce, as it prepares to break free from Time Warner after one of the most disastrous mergers in corporate history.
The cuts are part of a plan to save 300 million dollars at AOL, which is to regain its independence on December 9, the company said.
"Over the next several months we will be looking to reduce approximately one-third of our overall workforce," AOL spokeswoman Tricia Primrose said.
Primrose said that a voluntary departure program for employees would begin December 4, seeking to reach the target of 2,500.
"We will need to do an involuntary layoff if we do not reach the target numbers through the voluntary option," she said. "We believe the voluntary program gives people more choice and decision-making ability instead of waiting for the final cost recommendations and involuntary layoffs."
AOL chief executive Tim Armstrong announced he was foregoing his bonus for 2009 -- reportedly between 1.5 million dollars and four million dollars.
"As a member of our team and the person who takes accountability for the results of the company, I am making the decision to forego my 2009 bonus," Armstrong said in an email to employees.
"That decision is a personal one and is not a sign for the future payout of the overall bonus plan for employees."
As of December 10, AOL will become a separately traded company, bringing to a close a controversial merger with media giant Time Warner at the height of the tech boom.
The company is to focus on expanding in areas such as online media content and branded display advertising as its dial-up Internet-access business wanes.
An independent AOL would be free to focus on growing its Web brands and services and its advertising business, according to Time Warner, which also spun off its cable television unit this year.
AOL disclosed in a regulatory filing recently that it faced up to 200 million dollars in charges through the first half of 2010 under its restructuring effort codenamed "Project Everest."
That was on top of the 83 million dollars the Dulles, Virginia-based AOL spent on the overhaul through the first nine months of this year.
"As you know, AOL?s cost structure is something we have looked at for the past four months, and we have spent an enormous amount of time reviewing ways to fix the cost structure," Primrose said of the restructuring expenditure.
AOL, formerly known as America Online, saw its heyday as a provider of dial-up service in the early days of the Internet but has been losing ground as consumers switch to high-speed or broadband services.
Time Warner merged with America Online in 2001 at the height of the dot-com boom, with AOL using its inflated stock as a currency for the transaction.
But the marriage of old and new media behemoths baptized AOL Time Warner quickly went sour as benefits promised to shareholders failed to materialize.
Billionaire corporate raider Carl Icahn once described the merger as a "colossal mistake."
AOL was valued at more than 150 billion dollars when the ill-fated merger was announced but its worth collapsed dramatically as the dot-com bubble burst.
Time Warner was forced in 2002 to massively write down the value of the Internet unit and the AOL name was removed from the group's corporate title in 2003.
AOL is currently the number four Web gateway after Google (NASDAQ: GOOG - news) , Microsoft (NASDAQ: MSFT - news) sites and Yahoo (NASDAQ: YHOO - news) ! and has been trying to refashion itself recently as a popular one-stop portal.
Time Warner shares lost 1.58 percent in New York on Thursday to close at 32.30 dollars.
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