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AOL forced to make 1,4000 staff redundant

Voluntary layoff program falls short of target

AOL has started making employees redundant after a voluntary layoff programme fell short of its goal late last year.

In December, AOL sought up to 2,500 employees willing to voluntarily walk away from their jobs.

However, only 1,100 employees took up the offer, AOL spokeswoman Tricia Primrose said. The company originally wanted to trim a third of its 6,900 staff.

"We've looked at every aspect of this business. We evaluated our competitive position and product portfolio in every market - and we asked the hard questions about areas that were no longer core to the strategy and our profit profiles in the businesses and countries where we operate," Primrose said.

"All of our cost alignment work is about ensuring AOL's sustainability and future success," she added.

AOL started meeting with employees Monday in Europe. The total number of employees who are eventually laid off depends largely on how many are cut in Europe.

In the US, the picture is clearer. Some employees have already been notified, but most will be told this week.

"We will be offering packages to impacted employees in the US that will include severance, benefits and outplacement assistance, among other things," she said.

Primrose declined to break out how many employees will be laid off in the US and how many in Europe.

The round of layoffs comes at a critical time for AOL, which was spun out as an independent, publicly traded company in December from former parent company Time Warner.

AOL has been struggling for years to shift its business from one based on dial-up internet access subscriptions to one based on online advertising. However, its online advertising revenue hasn't kept pace with the industry's average.

In Time Warner's third quarter, which ended September 30 2009, AOL's revenue dropped 23 percent year-on-year to $777m, while the advertising portion dropped 18 percent, much more than the global online ad industry, which, according to IDC, had a one percent revenue drop.

Since the beginning of 2005, Aol's online ad market share in the US has fallen from 8.2 percent to 4.4 percent in this year's third quarter, according to IDC.

Tim Armstrong came over from Google in March to take over as CEO and is executing a strategy focused on increasing original content, revamping advertising programs and systems, and updating internet communication services.

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See also: Struggling AOL switches focus to content


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