AOL Hands Out Pink Slips, Plans to Cut 10% of Staff

By Mike Musgrove and Derek Kravitz
Washington Post Staff Writers
Wednesday, March 11, 2009

Once the cornerstone of a booming local tech economy, AOL yesterday executed its second major round of layoffs in two years amid a weakening online advertising market. The company is shedding 10 percent of its workforce by the end of this month.

Officials would not comment on the matter or put a number on how many workers at the Dulles campus lost their jobs yesterday, but AOL has said that it has plans to reduce its domestic headcount by 700 people. More cuts may be on the way; the company intends to finish the current round of layoffs by the end of March.

The tech sector has sometimes been thought of as immune to economic woes suffered by other industries, but the past few weeks have dispelled that notion as giants such as Microsoft, Intel and Dell have handed out pink slips to thousands of workers.

Yesterday's cuts at AOL followed an internal announcement by chief executive Randy Falco that such a move was on the way.

"The deepening economic recession has affected every corner of the economy, including our own," he wrote in a memo that was e-mailed to AOL employees in January. "Reducing our workforce is never easy, particularly in the current climate, but our goal in doing this is to provide our core businesses the resources they need to thrive."

Several dozen laid-off AOL employees gathered yesterday afternoon at Clyde's Willow Creek Farm in the Ashburn area. A collection of computer programmers, administrators and other office personnel exchanged phone numbers and asked former co-workers to keep in touch via the networking Web site, LinkedIn. Business was brisk at the bar, waiters said.

Many of the axed employees said they weren't given an estimate on how many people were let go or what departments were affected. One former employee said he didn't even know how many people in his division were now jobless.

"If there was a number, we wouldn't know it," said the former worker, who spoke only on condition of anonymity. "No one saw this coming."

The company was once famous for its popular dial-up Internet connection service, and in recent years it has tried to reposition itself as an advertising-supported Web services business with an acquisition last year of the social networking service Bebo, which claims 40 million users. Facebook, by comparison, has more than 155 million users.

AOL's first round of large-scale layoffs came in 2007, when the company cut 20 percent of its worldwide workforce of 10,000 people.

One analyst said yesterday that he was surprised that this year's 10 percent workforce cut wasn't even deeper.

"AOL isn't a leading-edge company anymore, and they're saddled with an old business that inhibits their ability to move into new areas," said Roger Kay, president of Endpoint Technologies Associates. "They'd like to be a portal, sort of like Yahoo, but they haven't been able to do that very well."

Affected AOL workers were e-mailed Monday afternoon that they needed to attend an "important meeting" the next day. In a comment posted to The Washington Post's Web site yesterday, one reader said her husband had been laid off from the Dulles office.

"We knew about it last night because the night before a layoff, AOL sends affected employees an email saying that they must attend a mandatory HR meeting the next day," she wrote. "He was given 2 months severance and 2 months free COBRA. He worked for AOL for 15 years."

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