AOL restructures, cuts 1,200 jobs
By Seth Sutel
Associated Press
NEW YORK — America Online is eliminating another 1,200 jobs, or 8 percent of its work force, as the unit reorganizes itself, copes with an advertising downturn and integrates with the rest of the AOL Time Warner Inc. media conglomerate.
An additional 500 jobs are being cut at iPlanet, a software maker that AOL co-owns with Sun Microsystems. IPlanet employees 3,000 people, making the cuts there equivalent to 17 percent of that company's work force.
The cutbacks will result in a charge against earnings of $100 million to $125 million in the third quarter, the company announced late yesterday. It was the second wave of job cuts at the unit since its merger with Time Warner closed in January.
Barry Schuler, the chief executive of America Online, said in an interview that the revamp would split AOL into two main units, one focusing on Web brands and another on the AOL service.
"If you look at the market overall, half of the consumers buy AOL and want the packaged offering, the other half is going into the web and doing their own thing," Schuler said.
Schuler said the revamp was driven mainly by a need to streamline AOL's internal structure, but also to integrate the unit with the rest of AOL Time Warner and to respond to a slower market for online advertising.
"We've grown a lot from acquisition," Schuler said. "We're eliminating a lot of duplication in management and infrastructure. ... This is something we do every year. What you focused on last year changes next year. If you're not constantly reevaluating your business you can't be a leader."
AOL had already cut 725 positions in January, shortly after the merger between AOL and Time Warner closed, as part of a companywide shake-up that cost more than 2,000 jobs.
AOL Time Warner's shedding of jobs didn't surprise Steve Weinstein, senior research analyst with Pacific Crest Securities of Portland Ore.
Although the talk of job cuts had been whispered about for more than a week, Weinstein said AOL had done well under "incredibly difficult" business circumstances.
"This is probably the worst advertising environment in 20 years," said Weinstein. "With all the media properties they have, it's amazing we didn't see this pain earlier."
As part of the new organizational shake-up, the company will create one division that groups all of AOL's web brands such as Netscape, CompuServe and Moviefone. It will be headed by Jim Bankoff, the current head of Netscape, and coordinate the online activities of other parts of AOL Time Warner properties such as People magazine and CNN.
The other part will deal with delivering electronic services and will be headed by Jonathan Sacks, currently head of the AOL service.
The company has also created a new integrated division to sell advertising and marketing services across AOL's brands and properties.
