AOL to cut 1,200 from Net unit
Published: 22 Aug 2001 09:36 BST
AOL Time Warner said on Tuesday that it plans to slash 1,200 positions from its America Online unit, the second round of layoffs in the online unit since its merger with Time Warner.
The company said an additional 500 people will be laid off from AOL's enterprise software alliance with Sun Microsystems. AOL employs 16,000 people.
AOL Time Warner will take a $100m to $125m charge in the third quarter for costs relating to the restructuring.
The restructuring, which was widely expected, marks an ongoing attempt by AOL Time Warner to streamline its operations in the face of a souring economy. The company has set aggressive financial goals for the year of $40bn in revenue and $10bn in earnings before interest, taxation, depreciation and amortisation (EBITDA).
Last quarter, the company missed its revenue estimates, leading some on Wall Street to question whether AOL Time Warner would make its financial goals.
Analysts applauded Tuesday's decision to cut staff at the Internet unit.
"It's a smart move," John Corcoran, Internet analyst at CIBC World Markets, said of the layoffs. "What they're doing is tightening the belt in a challenging macroeconomic environment."
Corcoran said that since the company generates 25 percent of its revenue from advertising, it is struggling to increase that revenue each quarter.
"America Online and cable are really pulling most of the weight here," Corcoran said. "This is not as though this thing is broken and they're trying to resurrect it."
Tuesday's announcement marks the second time AOL Time Warner has cut staff in its Internet unit since its merger. Shortly after that deal closed, the company slashed about 2,400 jobs. Divisions affected in that round included America Online, CNN, Time, Warner Bros. Online, Warner Music Group and New Line Cinema.
The latest layoffs are accompanied by an overall executive restructuring within the AOL division:
Jonathan Sacks was named president of the AOL Interactive Services Group, which will oversee the AOL online service and its Digital City local Web guide.
Former Netscape head Jim Bankoff will become president of AOL Web Properties Group and oversee operations for Netscape, CompuServe, Moviefone, MapQuest, ICQ and AOL Instant Messenger.
As previously reported, Robert Friedman will head sales and marketing as president of the Interactive Marketing Group.
Don Davis will become president of the Vertical Markets Group, which will oversee advertising and commerce for areas such as music, personal finance and travel, among others.
Former CompuServe President Audrey Weil will become president of AOL Broadband Group to grow its AOL cable, DSL and satellite services.
Lisa Hook will head AOL Anywhere, which offers AOL services outside of the PC.
The company added that it plans to share more resources, such as technology, business affairs, marketing and communications, across many divisions to further cut costs.
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