More NewsAOL to Cut 700 Jobs

AOL to Cut 700 Jobs

UPDATE: The company is said to be cutting jobs in an effort to reduce spending ahead of its quarterly earnings report.

In a cost-cutting move, America Online plans to cut more than 700 employees at its Northern Virginia headquarters next month, according to a person familiar with the matter.

AOL’s headquarters in Dulles, Va., is home to 5,000 of AOL’s 13,000 U.S. employees.

AOL officials declined to comment on any impending job cuts. AOL’s parent company, Time Warner, will report its third quarter earnings tomorrow morning.

AOL’s January 2001 marriage with Time Warner has been rocky almost from the start. AOL’s troubled post-merger path include plummeting ad revenues following the bursting of the dot-com bubble and ongoing regulatory probes of how it booked ad deals during the dot-com heyday. A string of executives stepped down, including AOL founder Steve Case, who resigned as AOL Time Warner chairman in January 2003.

A weakened advertising market, and a failure to capitalize on the market’s rebound, was to blame for much of AOL’s distress, but AOL has also been losing its core dial-up subscribers to both high-speed cable and DSL providers and low-cost competitors like United Online’s NetZero, Juno and BlueLight. The company had 23.4 million members in the U.S. as of June 2004, down from its high of 26.7 million two years ago.

Time Warner removed “AOL” from the corporate name in September 2003. Until last quarter the AOL unit had posted consistently lower ad revenues since the merger, prompting persistent rumors of plans to spin out the ISP from its corporate parent.

Time Warner has stated that its priority is to turn AOL around and return it to a growth track. AOL executives laid out that turnaround plan in December 2002, including a more focused strategy on growing its broadband subscribers.

AOL reported advertising revenue growth last quarter for the first time since 2001. Its acquisition of online marketing company Advertising.com, announced in June, should also help it benefit from the recovering online advertising market, as competitors like Yahoo have.

Erin Joyce, executive editor of internetnews.com, contributed to the reporting for this story.

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