AOL folds in Netscape

America Online Inc. announced last month it will reorganize into four product groups, including one devoted to Netscape Communications Corp.’s operations, and will lay off between 700 and 1,000 workers from AOL and Netscape combined.

The new product groups will be: the Interactive Services Group, focused on AOL’s interactive services including CompuServe and Netscape’s Netcenter portal Web site; the Interactive Properties Group, built on properties that work on other platforms such as ICQ instant messaging; the Netscape Enterprise Group, which will also be part of a new AOL-Sun Microsystems Inc. e-commerce strategic alliance announced at the same time; and the AOL International Group, overseeing AOL and CompuServe operations outside the United States.

The company has a wholly owned subsidiary in Canada, and a joint venture with Bertelsmann AG in Europe and Australia, and with Mitsui and Nikkei in Japan. The company also plans to launch services in Hong Kong with China Internet Corp. and in Latin America with The Cisneros Group, an AOL statement said.

Each of the four groups will report to Bob Pittman, president and chief operating officer of AOL, and both AOL and Netscape executives will hold key management positions within the groups. Netscape operations will remain based in Mountain View, Calif., AOL said in the statement.

Meanwhile, AOL said it would eliminate between 350 and 500 jobs both internally and at Netscape. Currently, about 12,000 people work at the two companies, including about 2,500 at Netscape. AOL spokesperson Jim Whitney said the company would be finalizing over the next few weeks what jobs in which areas of the companies would be cut.

Whitney declined to say which Netscape products or services may be phased out, but it was clear from the company’s statement that Netcenter and Navigator browsers would be maintained and developed.

AOL plans to extend the reach of Netcenter, which it said will enable AOL to increase its daytime traffic and capture audiences by broadening its reach worldwide. In addition, AOL will release the 5.0 versions of Navigator and Communicator later this year and will continue Netscape’s policy of supporting open development and open source through the work of, the organization that manages Netscape’s open-source initiative for developers.

“We will continue to build Netscape’s successful businesses, including expanding the audience for the popular Netscape Netcenter and extending both the Navigator and Communicator browsers to the emerging market of next-generation Internet devices,” Steve Case, AOL chairman and CEO, said in the statement.

One analyst said it made sense for AOL to reorganize along product and service lines, particularly since Netscape’s enterprise businesses are so different from AOL’s and are more corporate rather than consumer focused.

“AOL has diversified in a number of different areas, and of course their main business is the interactive services,” said Joan-Carol Brigham of International Data Corp.

However, Brigham wondered how long AOL can remain a “generic” site before moving into speciality areas. “Even though it’s not necessarily so, AOL does have a perception of being a sort of closed system and I think that works against them somewhat.”

Rob Enderle, an analyst at Giga Information Group Inc., also praised the reorganization.

“They’re forming organizations that hover around their individual strengths,” he said. “It looks like they’ve done a great deal of thought.”

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