AOL Announces Layoffs

AOL Announces Layoffs

America Online chairman and CEO Jonathan Miller announced Aug. 3 that around 5,000 jobs would be cut from AOL’s 19,000 person work force over the next six months.

The announcement came as part of a larger conversation about the new business strategy AOL is planning to put into action this fall, AOL spokesperson Tricia Wallace said.

AOL recently announced its plan to move from paid to free subscriptions in order to try and increase its online advertising.

THIS IS THE second time in less than two years that AOL has announced layoffs.

In Decemeber 2004, the company laid off 750 workers. Most of those workers came from AOL's Dulles campus.

A number of the 2006 cuts could come from customer service, which has offices throughout the United States and across the world, since AOL will be moving away from 24-hour customer service as part of its new plan.

The cuts could also come from a change in AOL’s international business dealings.

A day before the upcoming layoffs were announced, AOL announced it had entered into exclusive negotiations with French company Neuf Cegetel for the sale of AOL’s French access services business, including the customer service center in Marseilles.

Employees transferred under the new company would be counted as part of the 5,000 job cuts for AOL. The sale is expected to be complete by the end of the year.

THERE ARE NO official estimates as to the number of cuts that will come from AOL’s Dulles campus or how the layoffs will impact Loudoun’s work force and economy.

"Of the 5,000 people employed in Loudoun County there has been talk of possibly 900 people being laid off," said David Bennett, manager of Strategic Initiatives and Communications for the Department of Economic Development. "But I have heard that about half of the AOL staff [at Dulles] commutes from other jurisdictions, so there is no way to know exactly how it may affect the county."

Bennett said that while no official numbers have been given, he believes that the strength of the technology industry in Northern Virginia will help Loudoun workers.

"This county has the lowest unemployment rate in the region, so hopefully the job market would absorb those workers," he said. "I would hope that new opportunities open up."

THE COMING LAYOFFS are only part of AOL’s plan to save money with its new business strategy. The company is also planning on cutting costs in order to keep its yearly earnings the same as they have been in past years.

"Overall our plan is to reduce operating expenses by more than $1 billion by the end of next year," Jeff Bewkes, president and chief operating officer of Time Warner, AOL's parent company, said in a phone call to financial analysts Aug. 2. "We will absorb between $150 [million] and $200 million of restructuring costs this year in 2006."

In the same phone conversation, Bewkes said AOL is planning on no longer marketing to dial-up subscribers by mailing out disks or programs. The move will reduce the marketing and infrastructure costs, increasing the company's yearly earnings.

However, layoffs will be a large part of how the company will save money and, until AOL announces exactly how many jobs will be cut from the Dulles campus, the county and AOL employees are in a "wait and see" mentality, Bennett said.

"Our job market is strong," he said. "That is a very good thing about this area."