AOL to lay off a quarter of its workforce

AOL LLC will slash up to 5,000 jobs worldwide, or just over a quarter of its workforce, as the struggling unit of Time Warner Inc. restructures in an effort to bring in more revenue.

Various news Web sites reported the job cuts Thursday afternoon, citing an official announcement from AOL and sources familiar with what was said at a company-wide meeting earlier in the day. AOL and Time Warner representatives could not immediately be reached for comment and confirmation.

However, word of layoffs is no surprise as job cuts have been widely expected. Setting the stage for big changes to come, AOL last month put out word that it planned to announce a major new strategy, which it did on Wednesday, saying that it will not charge Internet customers for most of its content and services, including e-mail.

With AOL positioned as a portal site for high-speed users, Time Warner said that it expects to spend US$250 million to $350 million by the end of next year to make changes and that half of what it spends will go to employee severance.

AOL has long been bleeding subscribers — almost 1 million in the second quarter of this year — who are turning to broadband Internet access offered by competing service providers. So, Time Warner is pinning its hopes for an AOL resurgence on robust online ad revenue, with its new free-services business plan looking more like competitors Google Inc. or Yahoo Inc.

Job cuts are expected to be deep in Europe as AOL plans to sell various of its Internet access businesses in a number of countries.