More Layoffs At AOL, 100 Get Pink Slips


Ahead of broader layoffs at AOL, the soon-to-be-independent company issued pink slips to 100 staffers on Tuesday, Online Media Daily has confirmed.

The layoffs, first reported by Gawker Media's Valleywag blog, will be widespread across the company, according to a source close to the decision.

The cuts, however, are not related to AOL head Tim Armstrong's broader cost-cutting initiative -- code-named "Project Everest" -- which is expected to take effect within the next month. Of AOL's roughly 6,000 employees, layoff estimates range between 1,000 and as many as 2,000.

Last month, news broke that AOL had hired consultants Alix Partners to orchestrate the company's broader layoffs. A knowledgeable source told The Wall Street Journal's Business Insider blog that Alix was helping AOL with a "top to bottom" look at the company in terms of "process efficiencies, cost structure, and strategy," but had yet to come up with an exact number of layoffs.



In late May, Time Warner's board of directors authorized plans to spin off AOL as an independent, publicly traded company by the end of the year.

Leading up to the planned split, however, AOL continues to struggle. Revenue at the online unit was down 23% in the third quarter, Time Warner reported last week. Subscription revenue was down another 29%, while ad revenue was down 18%.

In September, respected JP Morgan analyst Imran Khan estimated that an independent AOL will be worth just $4.2 billion, while Pali Research analyst Rich Greenfield valued AOL at a mere $4 billion -- just four times a recent valuation of upstart micro-blogging service Twitter.

More optimistic about AOL's future, Pali's Greenfield wrote in a research note: "To the extent that AOL's new management can paint a 2010 story that AOL EBITDA can do better than a 20% decline, we believe there could be meaningful valuation upside -- not to mention, the upside if M&A speculation surfaces (given the significant traffic AOL's sites continue to command)."

Likewise, JP Morgan's Khan alluded to a "rebound" for AOL next year, "as RPM pricing improves and the company implements cost cuts." Without explanation, Khan also predicts declines to resume at AOL in 2011.

Under the direction of new CEO Tim Armstrong, AOL recently outlined a new five-point strategy for the future of the company, including the continued expansion of vertical content, local and online mapping services, its third-party ad network, communication tools, and early-stage investment through a newly formed AOL Ventures arm.

The new AOL is expected to exist less as a Web portal and more as a fragmented network of niche content sites. This MediaGlow network, so-called, presently encompasses over 70 niche content sites -- with many more on the way, according to Jeff Levick, who was recently appointed president of AOL Advertising.

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