AOL To Cut 2,500 Jobs

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AOL management is asking for voluntary redundancies in order to reduce its operating costs by $200 million, but involuntary layoffs will follow if AOL does not hit its target

AOL plans to reduce its operating cost, and so is asking for so-called voluntary layoffs. Involuntary layoffs will follow if AOL does not hit its target of shedding $200 million (£120 million) in the first half of 2010. Time Warner plans to spin the company off in 2010.

AOL will be reducing its work force by 2,500 of its current 6,900 employees, or about one-third, the company said in an internal memo on 19 November. The online media and internet service provider has a long and storied history in the rise of the internet dial-up business, but has suffered for years from a dwindling subscription base and increased competition from broadband and other ISPs.

The first wave of layoffs will start in December and will take place through a voluntary program offering more attractive severance packages. Other cuts to come in the first quarter of 2010 will be less attractive.

The company has focused on providing original online content and competing strongly in the online advertising market, something AOL said it believes it can do with a leaner staff. AOL is being spun off from Time Warner and needs to reduce its operating budget by $300 million (£181 million), with the aggressive goal of knocking $200 million (£120 million) off it by the middle of 2010, said The Wall Street Journal.

AOL has explained its plans to its employees, and shared much of its info with Silicon Alley Insider, which has been documenting the incremental changes at AOL for some time. SAI shared the following info from AOL, including that CEO Tim Armstrong is giving up his 2009 bonus:

  • Voluntary layoff program announced: We announced a voluntary layoff program that begins 12/4 and extends to 11 December (post-spin). Looking for up to 2500 volunteers. We will need to do an involuntary layoff if we do not reach the target numbers through the voluntary option. We believe the voluntary program gives people more choice and decision-making ability instead of waiting for the final cost recommendations and involuntary layoffs.
  • Tim’s bonus: Tim also announced as a part of his communication to employees that he was foregoing his bonus for this year. He noted in his email: “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. That decision is a personal one and is not a sign for the future payout of the overall bonus plan for employees.” 

SAI has also published this as the AOL severance offer:

  • SVPs get 9 months for volunteering now vs. 4 months in Q1
  • VPs get 6 months vs. 4 months in Q1
  • Director is 4 months vs. 2 months in Q1
  • Sub-director is 3 months vs. 1 month in Q1

“It’s no longer a huge and growing ISP, or a company that needs tech products to do anything but drive page views to media (like the way AOL Mail does),” Nicholas Carson of SAI wrote. “Tim Armstrong wants to make AOL a content publisher, fueled by a shrinking ISP business that still manages to throw off tons of cash.”

The company laid off 700 employees earlier in 2009, said The Wall Street Journal.

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