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AOL plans to cut a third of workforce
Firm offers incentives but warns that layoffs may follow

By Mike Musgrove
Washington Post Staff Writer
Friday, November 20, 2009

AOL said Thursday that it plans to reduce its workforce by a third over the next several months.

The company, which is based in New York but maintains a large campus in the Dulles area, employs about 6,900 people. The company is hoping to get as many as 2,500 workers to depart voluntarily and is offering extra severance pay to people who leave by the end of December.

For the time being, AOL is still part of Time Warner, though the media giant is scheduled to spin off the former dial-up Internet giant into a separate company Dec. 9.

Chief executive Tim Armstrong announced the latest round of restructuring in an e-mail and a video that was shared with employees Thursday morning.

Armstrong, a former Google executive, took the reins at AOL earlier this year. From nearly the beginning of his time at the company, Time Warner made it clear that a spinoff was in the works. Last year's decline in Web advertising hit AOL hard and was severe enough to bring down the profits of its parent. Last year, AOL's revenue fell 20 percent, to $4.17 billion.

Under Armstrong, who led Google's advertising business during his career there, AOL has sought to reinvent itself as a Web content and advertising company. In its portfolio are successful and popular properties such as the celebrity news site TMZ, tech blog Engadget and map service Mapquest.

In his Thursday morning e-mail, Armstrong told employees that he would not take a bonus this year because he is "the person who takes accountability for the results of the company."

"That decision is a personal one and is not a sign for the future payout of the overall bonus plan for employees," he wrote.

The company did not identify where it is looking to reduce staff; all AOL employees are eligible to take part in the company's "voluntary separation program" that includes incentives to leave by the new year. If not enough people take the offer, said an e-mail circulated to AOL employees, a less generous and non-voluntary round of layoffs could follow.

In a Securities and Exchange Commission filing, AOL said that it expects to spend $200 million as it restructures the company. The company said it hopes to save $300 million in annual operating expenses as a result of the staff reduction.

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