AOL-Netscape Merger Trims 850 Jobs
By Shannon Henry
America Online Inc. of Dulles, which has been on top of the Internet world lately as it finalized a mega-merger and watched its stock skyrocket, had to deliver some unhappy news yesterday: It let go 850 of its 12,000 employees, including about 250 from the Washington area.
Early yesterday morning, managers met face to face with those given pink slips. Because the terminations were effective immediately, most dismissed employees left the building soon after they were notified, said AOL sources.
AOL said it made the layoffs primarily because of overlapping jobs created by the merger with Netscape Communications Corp. that was completed two weeks ago. AOL also decided to trim specific jobs that didn't fit into the company's future plans, said company spokesman Jim Whitney.
"As we integrated Netscape, we took a hard look at how best to organize ourselves for future growth," Whitney said. "The new structure is streamlined and will allow us to move very quickly to seize new opportunities."
While the company had said it would be making cuts this week or next, moving quickly to avoid morale problems, the employees did not learn until yesterday who would lose their jobs. AOL said it does not plan any more layoffs.
About half of those let go were from software company Netscape and half were from AOL, the world's largest online services company. Before the merger, roughly one-third of AOL's 9,500 workers were based in the Washington region. Most of Netscape's 2,500 employees were in Mountain View, Calif. The AOL layoffs hit many departments, and the bulk of the jobs lost were in programming and content development, said AOL sources. On the Netscape side, the terminations affected mostly employees in administrative jobs rather than engineering or other technical positions.
Analysts had not expected many high-level people to lose their jobs. But six AOL vice presidents, all in the areas of interactive services and AOL technologies, were let go yesterday, said AOL sources, who added that some of the higher-level people were informed the night before. There are about 100 AOL vice presidents.
Wall Street analysts said they approved of AOL's speediness in its layoff plan. "It's a difficult situation, but any time companies merge you have redundancies," said Paul Merenbloom, an analyst with Prudential Securities Inc. in New York.
The AOL layoffs are a bit different from firings in other industries. Because technology workers are in such high demand, AOL and Netscape workers are likely to get good offers from competing firms quickly and to leave with stock-rich severance packages. All of those dismissed received a minimum three months of salary and health benefits and an offer of help finding new employment.
Some analysts said the layoffs could even have a positive domino effect to the work force, especially if the fired workers start new companies.
"Don't shed any crocodile tears for these people," said Ulric Weil, an analyst with Friedman, Billings, Ramsey Group Inc. "They will be snapped up."
Staff writer Sarah Schafer contributed to this report.
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