Cost-Containment Efforts Cited as Reason for Layoffs

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NEW YORK ( -- America Online yesterday laid off 450 employees, mostly software engineers and developers. The job cuts are the second largest this year by the Time Warner unit, which had laid off 420 call-center employees this past spring and shifted the jobs to India.

The latest round of cuts, which account for 2% of AOL's 19,000-member workforce, are attributed to the company's ongoing cost-containment efforts, according to a company spokesman, who said the jobs aren't being outsourced.

Office closings
The jobs, located in Mountain View and San Diego, Calif., will result in the Dec. 31 closure of AOL's San Diego and San Francisco software development offices. The Mountain View office was home to Netscape Communications software engineers (Netscape was acquired by AOL in 1999, prior to the AOL Time Warner merger.) More than 2,500 engineers worked at that office four years ago. AOL has said it still plans to introduce a niche, Netscape-branded service in 2004.

Software development will be consolidated at AOL's Irvine and Mountain View facilities, the spokesman confirmed. Of the 450 positions eliminated, 100 employees are being offered the opportunity to relocate either to AOL's Dulles, Va., headquarters or White Plains, N.Y. Software development for a majority of AOL's entertainment-related properties is conducted in White Plains.

Internet rivals
AOL is trying to regain its footing amid subscriber defections and slumping ad revenue. It has lost subscribers to cut-rate, dial-up Internet services from the likes of United Online and Wal-Mart and high-speed broadband providers including Verizon Communications and sibling Time Warner Cable.

AOL Broadband had more than 2.5 million subscribers at the end of the third quarter, according to a research report from Soundview Technology Group, an equity research firm. It added 640,000 subscribers in the last two quarters. Soundview pegged subscriber churn at 5% per month. About half of the gross new subscribers to AOL Broadband come from AOL's dial-up base of 22.1 million subscribers. A year ago, AOL had more than 30 million subscribers.

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