AOL to Cut 2,500 Employees Through Buyouts, Layoffs

CEO Armstrong Says He'll Give Up 2009 Bonus

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NEW YORK (AdAge.com) -- AOL will cut 2,500 employees, or about a third of its work force, as it looks to slim down costs on the eve of its spinoff from Time Warner. Initially, the cuts won't be targeted and will come from volunteer buyouts across the company, including sales, communications, maps, technology and the ad network.

AOL CEO Tim Armstrong told employees he's forgoing his yearly bonus.
AOL CEO Tim Armstrong told employees he's forgoing his yearly bonus.
If the 2,500 target is not met by Dec. 11, more targeted layoffs will begin in the first quarter, with the goal of ultimately saving $300 million in annual operating costs.

In an e-mail to employees, CEO Tim Armstrong said he would forgo his 2009 bonus, which was to be between $1.4 million and $4 million.

"That decision is a personal one and is not a sign for the future payout of the overall bonus plan for employees," he wrote. Mr. Armstrong's annual base salary is $1 million, according to filings.

AOL will take a $200 million restructuring charge early next year due to severance and other costs related to the restructuring.

AOL staffers were informed of the layoffs Nov. 19. Those that volunteer to leave the company during the week between Dec. 4 and Dec. 11 will receive a more generous severance package than those fired after the Dec. 11 deadline.

A VP-level executive, for example, will get six months severance if he or she volunteers, and just four months if that person is fired in the first quarter, according to a copy of the package obtained by The Business Insider.

"We believe the voluntary program gives people more choice and decision-making ability, instead of waiting for the final cost recommendations and involuntary layoffs," an AOL spokeswoman said.

AOL has staffed up its content businesses over the past year, and although the company acknowledges that division loses money, it believes its own advertising-supported sites such as Engadget, Asylum and Daily Finance offer the greatest opportunities for growth.

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