Friday, August 04, 2006

AOL to shrink workforce by 5,000

AOL to shrink workforce by 5,000

Time Warner Inc.'s AOL LLC online division said today that some 5,000 workers, or about a quarter of its staff, would no longer be on its payroll within six months as part of a restructuring that includes selling its European Internet access businesses.

"At a company meeting this morning, [AOL CEO] Jon Miller told AOL's worldwide workforce of 19,000 people that within six months, it was likely that around 5,000 employees would no longer be with the company," an AOL spokesman said.

AOL said yesterday during a conference call that it has a new strategy to boost online advertising sales by offering its e-mail and other Web services for free. It said it would continue selling dial-up Internet access, but would no longer market those services.

The company said it expects to book restructuring charges of up to $350 million by the end of 2007. It also plans to cut more than $1 billion in operating expenses in 2007.

AOL, which said during the call that it expected to reach deals to sell its European Internet access businesses by the fall, employs about 3,000 people in its access business in Europe, said one source who was on the call and asked not to be named.

AOL said yesterday that it entered into exclusive negotiations to sell its France-based access business with Neuf Cegetel, France's second-largest fixed-line telecommunications service provider. The deal could fetch about $384.1 million, sources have said.

Sources have said that AOL is in discussions in the U.K. with a round of bidders including British Sky Broadcasting Group PLC, The Carphone Warehouse Group PLC and France Telecom's Orange SA unit to sell its access business in the U.K. Bidders for AOL's German unit include VersaTel Telecom International NV, AG, United Internet AG, Telecom Italia SpA and KPN NV, several sources close to the sale process have said.

Other employees affected by the restructuring are likely to be workers who market the Internet service business and customer service representatives, said one source with knowledge of the plans.