AOL begins layoffs; 1,200 to 1,400 staffers to go

IDG News Service - After a voluntary layoff program fell short of its goal late last year, AOL has started the process of handing out pink slips to between 1,200 to 1,400 employees worldwide.

In December, AOL sought up to 2,500 employees willing to voluntarily walk away from their jobs. However, only 1,100 employees took AOL up on its offer, AOL spokeswoman Tricia Primrose said Monday via e-mail. The company wanted to trim a third of its 6,900 staff.

"We've looked at every aspect of this business. We evaluated our competitive position and product portfolio in every market -- and we asked the hard questions about areas that were no longer core to the strategy and our profit profiles in the businesses and countries where we operate," Primrose said.

"All of our cost alignment work is about ensuring AOL's sustainability and future success," she added.

AOL started meeting with employees Monday in Europe. The total number of employees who are eventually laid off depends largely on how many are cut in Europe.

In the U.S., the picture is clearer. Some employees are getting notice of their layoffs Monday, but most will be notified on Wednesday. "We will be offering packages to impacted employees in the U.S. that will include severance, benefits and outplacement assistance, among other things," she said.

Primrose declined to break out how many employees will be laid off in the U.S. and how many in Europe.

The round of layoffs comes at a critical time for AOL, which was spun out as an independent, publicly traded company in December from former parent company Time Warner.

AOL has been struggling for years to shift its business from one based on dial-up Internet access subscriptions to one based on online advertising. However, its online advertising revenue hasn't kept pace with the industry's average.

In Time Warner's third quarter, ended Sept. 30, 2009, AOL's revenue dropped 23% year-on-year to $777 million, while the advertising portion dropped 18%, much more than the global online ad industry, which, according to IDC, had a 1% revenue drop.

Since the beginning of 2005, AOL's online ad market share in the U.S. has fallen from 8.2% to 4.4% in this year's third quarter, according to IDC.

Tim Armstrong came over from Google in March to take over as CEO and is executing a strategy focused on increasing original content, revamping advertising programs and systems, and updating Internet communication services.