AOL to lay off up to 5,000 workers

updated 10:16 a.m. ET Aug. 4, 2006

NEW YORK - Time Warner Inc.'s AOL online division said Thursday that some 5,000 workers, or about a quarter of its staff, would no longer be on its payroll within six months as part of a restructuring that includes selling its European Internet access businesses.

"At a company meeting this morning, Jon Miller (AOL's chief executive officer) told AOL's worldwide work force of 19,000 people that within six months, it was likely that around 5,000 employees would no longer be with the company," an AOL spokesman said on Thursday.

AOL said on Wednesday on a conference call that it has a new strategy to boost online advertising sales by offering its e-mail and other Web services for free. It said it would continue selling dial-up Internet access, but would no longer market those services.

The one-time king of the online world said it expects to book restructuring charges of up to $350 million by the end of 2007. It also plans to cut more than $1 billion in operating expenses in 2007.

AOL, which said during the call that it expected to reach deals to sell its European Internet access businesses by the autumn, employs about 3,000 people in its access business in Europe, said one source who was on the call and asked not to be named.

AOL said on Wednesday that it entered into exclusive negotiations to sell its France-based access business with Neuf Cegetel, France's second-largest fixed-line telecoms provider. The deal could fetch about $384.1 million, sources have said.

Sources have said that AOL is in discussions in Britain with a round of bidders including BSkyB, Carphone Warehouse, and France Telecom's Orange unit to sell its access business in Britain.

Bidders for AOL's German unit include Versatel, freenet.de, United Internet, Telecom Italia , and KPN, several sources close to the sale process have said.

Other employees affected by the restructuring are likely to be workers who market the Internet service business and customer service representatives, said one source with knowledge of the plans.

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