Report: AOL to cut US$100M costs from online unit

ITworld.com –

AOL Time Warner Inc.'s (AOLTW) plan to stabilize and grow America Online Inc. (AOL) will include cutting US$100 million in operating expenses, partly through the elimination of hundreds of jobs.

Due to a large anticipated drop in advertising revenue, AOL Vice Chairman Joseph A. Rippat, the executive overseeing the company's restructuring plans, has informed managers that no division of the world's largest ISP (Internet service provider) will be immune from the job cuts, according to a report published in the online edition of the Washington Post on Friday, citing anonymous sources.

Representatives at AOL could not immediately be reached for comment.

News of the massive cost-cutting measures comes three days after executives at AOLTW laid out plans for turning around the struggling Internet unit to analysts and journalists. AOLTW is insisting that it can boost AOL's fortunes by generating more revenue from its 35 million subscribers through broadband and premium services, while reining in costs, retooling advertising offerings and restoring the company's integrity.

In Tuesday's presentation, AOL Chief Executive Officer (CEO) Jon Miller said that though 2003 will be a "transition year" for the company, 2004 will be a year of double-digit revenue growth for AOL.

Earlier that same day, AOLTW announced that it expects steep declines of up to 50 percent in its AOL commerce and advertising revenue for 2003.

AOL employs over 5,500 people in its northern Virginia headquarters and also has offices in New York, California and Ohio. Along with cutting jobs, mainly in Dulles, Virginia, AOL is also looking to save money on computer network expenses, the report said.

On Thursday, Miller held a meeting with AOL's 250 division heads to detail the cutbacks required in strategic areas to shore up the business, according to a report in The Wall Street Journal. Miller also warned in the meeting that the company needs to set realistic goals for Wall Street to restore the company's credibility, the report said.

AOL has been forced to restate financial results, and federal investigators are looking into whether former AOL executives purposely misled accountants and others in an effort to artificially inflate revenue figures.

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