Struggling AOL Slashes Jobs To Streamline Ops

As part of an ongoing effort to trim costs, America Online has laid off 350 workers in its California offices and has offered another 100 the choice to relocate to the East Coast or be fired.

AOL said most of the affected employees work in software creation for the core online service product in shops in San Diego, San Francisco and Mountain View, where the all-but-defunct Netscape unit was based.

Earlier in the year, the leading but struggling Internet service provider cut about 425 positions from its call centers in the United States, with some of those jobs transferred to overseas locations.

Sliding Backward?

Although the new cuts represent only about 2 percent of AOL’s worldwide workforce of 19,000 people, some experts say they indicate the recovery, which economists say is well under way, is unlikely to be matched by a job-creation boom. Optimism about the tech sector in particular has been running high as 2003 draws to a close, with IBM, AMD and other tech bellwethers indicating they likely will move to add employees in the coming year.

“We will probably not see a true job market boom until the next economic cycle around 2008,” said John A. Challenger, CEO of outplacement firm Challenger, Gray & Christmas. “Any job market rebound that takes place in the near future will be relatively small.”

In fact, Challenger told the E-Commerce Times, the type of white-collar jobs targeted for consolidation by AOL are likely to remain scarce even after the turnaround has taken hold.

“It appears the growth in jobs will come in lower-paying industries and service-sector jobs,” he said.

Leaner and Meaner?

AOL executives said the moves make sense because each of AOL’s remote offices now will have a single focus, unlike in the past, when engineers in Dulles, Virginia, and branch offices like San Diego often were working on similar projects.

For instance, the focus in Mountain View, former headquarters of Netscape, will be developing online content aimed at high-end users.

AOL workers reportedly have been bracing for layoffs since AOL’s parent company, Time Warner, indicated it would take a charge against earnings to accommodate severance and other payouts.

Time Warner dropped the reference to AOL in its corporate name in September, a move that reflected the company’s frustration with the performance of the Internet unit.

Up and Down

The AOL business unit has been seeking to cut costs even as it tries to entice more users by beefing up its service with additional features, such as digital photography management and online music and video, including exclusive content.

On Wednesday, AOL announced yet another online gaming feature, this time giving its members free access to Case’s Ladder, a service that ranks users of PlayStations and similar consoles and enables them to compete head-to-head.

Last week, AOL began dangling a US$299 PC deal in a bid to attract new members to replace some of the nearly 2 million users it has lost in the past year. AOL still has about 25 million users worldwide.