Time Warner Inc.’s AOL business is cutting up to 700 jobs, or about 10 percent of the Internet unit’s work force, in a bid to cut costs. AOL is being squeezed by the recession and trying to focus on three advertising-centric businesses.
AOL Chief Executive Randy Falco told employees in a memo Wednesday that AOL plans to cut the jobs in the next several quarters, and that the company hopes to have any U.S.-based cuts completed by the end of March. He also said that AOL will skip merit pay raises in 2009.
“Reducing our work force is never easy, particularly in the current climate, but our goal in doing this is to provide our core businesses the resources they need to thrive,” Falco said.
These “core businesses” are AOL’s “Platform A” advertising unit, “MediaGlow” publishing unit and “People Networks” social media unit. AOL has spent the last several years realigning itself around these three units — which are meant to bring in revenue through online advertising — as a way to offset losses from its fading dial-up Internet access service.
Traditionally, AOL was a dial-up Internet access provider. At its peak, the company had 26.7 million dial-up subscribers in September 2002. But that number has fallen drastically in the years since, as consumers began moving to faster broadband Internet services. In the third quarter, AOL reported a loss of 634,000 Internet-access subscribers, bringing its total to 7.5 million by the end of September.
In addition to AOL’s realignment, Time Warner has worked to separate the dial-up operations from these ad-focused operations — a move that would make it easier for Time Warner to sell one or both.
The company has been in continual discussions with both Yahoo and Microsoft over AOL’s Web sites and ad operations, while rival access provider EarthLink Inc. is seen as…