After announcing a spin-off from parent company Time Warner on Monday, AOL is moving to reduce its head count about one-third. AOL is looking for employees who are willing to resign from their jobs at the once-dominant Internet firm.
As part of a voluntary layoff program that will begin Dec. 4 and run through Dec. 11, AOL will accept up to 2,500 resignations. That would shave about 30 percent of its 6,900 employee base -- if the packages are healthy enough to convince employees to quit their jobs in the midst of a recession.
"We will need to do an involuntary layoff if we do not reach the target numbers through the voluntary option," said AOL spokesperson Tricia Primrose. "We believe the voluntary program gives people more choice and decision-making ability instead of waiting for the final cost recommendations and involuntary layoffs."
Trimming Fat -- or Muscle
AOL's costs will decline with the job cuts, but there is no guarantee the layoffs will translate directly to an improvement in the company's market position, according to Greg Sterling, principal analyst at Sterling Market Intelligence.
"AOL is getting rid of what they perceive to be fat. But if you are asking people to voluntarily resign, then you are not necessarily getting rid of fat," Sterling said. "You may be losing some good people who decide it's not going to be worth it to be there."
As Sterling sees it, AOL has a lot of assets, but also a lot of challenges. The company needs to figure out its role, how it is different from Yahoo, and how it is going to compete and when. Those are the questions that AOL is must answer, Sterling said.
The layoffs aren't unexpected. When Time Warner first announced plans to spin off AOL, a company it acquired in 2000, Time Warner Chairman and CEO Jeff Bewkes said it was the best outcome for both companies and called it a critical step in reshaping Time Warner. AOL, he said, will have a better opportunity to achieve its full potential.
Focusing on the Web
AOL will focus on growing its web brands and services, as well as its advertising business, which operates the leading online display network  that reaches more than 91 percent of the domestic online audience. AOL will also continue to operate one of the largest Internet access subscription services in the U.S.
"Becoming a stand-alone public company positions AOL to strengthen its core businesses, deliver new and innovative products and services, and enhance our strategic options," AOL Chairman and CEO Tim Armstrong said in May when the spin-off was announced. "We play in a very competitive landscape and will be using our new status to retain and attract top talent. Although we have a tremendous amount of work to do, we have a global brand, a committed team of people, and a passion for the future of the web."
On Thursday, Armstrong announced he is foregoing his bonus this year. In an e-mail to employees, he wrote: "As a member of our team and the person who takes accountability for the results of the company, I am making the decision to forego my 2009 bonus. That decision is a personal one and is not a sign for the future payout of the overall bonus plan for employees."
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