AOL laying off 700 staff members

Internet division narrowing its focus

NEW YORK -- Time Warner's AOL unit is laying off 700 staffers, or about 10% of its work force, as the Internet division narrows its focus on three core areas and tries to weather the recession, which has also hit online advertising.

In addition, AOL is forgoing merit pay increases this year, curbing discretionary spending and concentrating investments on key growth areas.

It is the latest rounds of job cuts at AOL as CEO Randy Falco and his team continue to refocus the business. It also comes after recent layoff news from other major TW units, such as its film and magazine divisions.

AOL pink slips will be delivered over the coming quarters, with U.S. cuts to be done by the end of March. The reductions will affect staff across the board and in different locations, sources said. However, three core areas that management is focusing on will be the least hit: advertising, publishing/Web sites and social networks.

Falco said in a memo to employees Wednesday that "our goal in doing this is to provide our core businesses the resources they need to thrive."

He added that AOL is at a pivotal point in its transformation, saying the unit is "two years into a three-year turnaround plan."

Falco's update to staff also said that "the deepening economic recession has affected every corner of the economy, including our own." Online marketers have tightened ad buying, "reducing their spend by hundreds of millions of dollars," he added.