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January 12, 2010

AOL Announces Layoffs; Caps Major Cost Cutting Efforts

By Susan J. Campbell, TMCnet Contributing Editor


For those who were hoping the worst of the layoffs were behind us, the news out of AOL this week is not good. The Wall Street Journal reported the Internet giant started a new round of layoffs on Monday. The company also plans to close some of its European offices.


According to a New York Times piece, AOL (News - Alert) had announced in November an effort to cut one-third of its workforce through a voluntary buyout program. As of this week, the company has failed to achieve that goal and now has to force staff members out of a job.

Roughly 1,100 employees did accept the buyout package in December, but the company was hoping to cut 2,300 jobs. For those who did accept the buyout offer, they received nine months’ pay and other benefits, dependent upon rank within the company.

After a cut of another 1,200 workers, AOL will keep 4,700 employees. This number is less than one-quarter of 20,000 employed by the company when it enjoyed its peak in 2004.

According to AOL, it began notifying affected employees in the United States on Monday, although company spokesmen decline to comment on the number affected. The company also stated that the majority of employees would be laid off by Wednesday. Timing of the layoffs in other countries that are subject to different labor laws will vary.

The major cost-cutting effort, dubbed Project Everest, was put in place by Tim Armstrong, the former Google (News - Alert) sales executive who became chief executive of AOL last year. The layoffs cap this effort as Armstrong tries to pare back AOL’s business to focus the company more narrowly on a few areas, such as content, online advertising and communications.

In December, AOL untangled itself from Time Warner (News - Alert), a partnership that was considered to be one of the worst mergers in U.S. corporate history. When the merger was announced in 2000, it was eagerly anticipated by many. It is now taught in business schools as how to avoid costly mistakes.

Susan J. Campbell is a contributing editor for TMCnet and has also written for eastbiz.com. To read more of Susan’s articles, please visit her columnist page.

Edited by Patrick Barnard


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