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AOL Money & Finance

AOL to cut thousands of jobs starting on Tuesday

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According to a Reuters story based on an internal memo, AOL will trim some 2,000 positions starting tomorrow. Job cuts at the Time Warner Inc. (NYSE: TWX) unit have been rumored for some time.

If this number of cuts is accurate, it will represent roughly 20% of the unit's global workforce. Reuters is saying the cuts will be spread out over the United States and Europe. It also notes that spending will increase in higher growth areas, such as advertising.

It looks like AOL is trying to make its operations run much leaner ahead of what very well could be an independent, or partially independent, AOL stock. Time Warner already has a tracking stock for its cable unit, and a separate AOL tracking stock would give it a currency that could be used to make acquisitions or do strategic deals that wouldn't rely solely upon cash outlays. Part of AOL's year and a half old deal with Google Inc. (NASDAQ: GOOG), in which the search giant bought a 5% stake for a $1 billion investment, requires some sort of liquidity event, but any amendments to original terms could change that.

AOL already switched to a free service a year ago, except for the old customers who just won't stop using their dial-up access. That move already resulted in job cuts. AOL is also in the process of moving its headquarters to New York City to be closer to advertising customers. We'll have to see where the actual cuts in this mega-round of layoffs come from before any verdict can be made.

Jon C. Ogg produces the Special Situation Investing Newsletter for 247WallSt.com; he does not own securities in the companies he covers.

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Last updated: July 04, 2009: 11:46 AM

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