Thursday, Internet company AOL said it plans to cut around one-third of its 6,900-strong workforce upon completion of a previously announced spin-off from Time Warner Inc. (TWX). In a communique to employees, AOL indicated the proposed job cuts, estimated at 2,300 positions, as part of its continuing cost-reduction measures that is expected to align its organizational structure and costs in line with its adopted strategy.
The restructuring would be through upon clearance from AOL's new Board of Directors that will take charge consequent to the spin-off.
AOL, in a filing with the U.S. Securities and Exchange Commission, said the job cuts would be implemented on a combination of voluntary and involuntary basis. The company would initiate a voluntary layoff program on December 4 and is looking for as many as 2,500 volunteers, according to reports.
The company aims to reduce annual operating costs by $300 million as a result of the restructuring and expects to incur charges of up to $200 million related to the changes. AOL anticipates the restructuring-related charges to occur from the date of the spin-off through the first half of 2010.
Time Warner indicated earlier this week that it plans to spin off AOL on December 9, so as to allow AOL to begin trading as a separate company on December 10.
On November 24, AOL common stock will begin trading on a "when-issued" basis on the NYSE under the symbol "AOL WI." On December 10, when-issued trading of AOL common stock will end and "regular-way" trading under the symbol "AOL" will begin.
Time Warner acquired AOL in 2001 for $147 billion. In 2002 and 2003, the media company incurred charges of about $100 billion due to declining value of the combined company, Time Warner and AOL.
In the recent third quarter, AOL segments had slipped 18% to $914 million from $1.12 billion from a year ago, on a 13% decline in Subscription revenues and 24% downturn in other revenues. The segment's operating income fell 40% to $97 million from $162 million in the year earlier period.
TWX is losing $0.91 or 2.80%, and is trading at $31.90 on a volume of 1.19 million shares on the New York Stock Exchange.
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