AOL to Cut 2,500 Jobs

On the even of spinning free of Time Warner, AOL has announced it will be cutting 2,500 positions, or about one third of its staff.

Struggling Web services and online advertising operation AOL has revealed in an SEC filing that it plans to cut about 2,500 positions from its total workforce as part of cost-cutting measures related to the company’s imminent spinoff from Time Warner. The job cuts will amount to about one third of the company’s total employee base; according to AOL, the cuts should cost the company about $200 million in severance and restructuring charges, but wind up saving the company about $300 million per year.

The layoffs will start with a voluntary buyout effort running from December 4 to December 11, but the company will shift to involuntary layoffs unless enough employees choose to leave the company of their own accord. AOL CEO (and former Google exec) Tim Armstrong announced the layoff plan to employees via email and video, and said he plans to pass on his own executive bonus for 2009. Once an involuntary layoff program begins, it will start with AOL’s 4,500-or-so employees in the United States, and then extend to the company’s international operations.

Earlier this week, Time Warner announced it will complete the process of spinning off AOL as an independent company on December 9.

The announcement on the eve of AOL’s re-instantiation as an independent company re-iterates how far the mighty have fallen. Back in 2000, AOL—then America Online—was valued at a whopping $163 billion when it merged with Time Warner. The deal was hailed as the first megamerger in the forthcoming “digital convergence” and a model for what media companies would become. However, the convergence never happened, AOL and Time Warner cultures clashed severely, competitors ate away at AOL’s walled garden and then its Netscape browser…with the result that Time Warner has been looking to shed itself of AOL for years. Whether AOL can make it on its own as a provider of free Web services and targeting advertising remains to be seen.