AOL Makes the Cuts

After announcing that it would move many of its America Online executives from Virginia to New York City, Time Warner's (NYSE: TWX  ) follow-up should surprise no one: It's cutting 20% of the AOL workforce.

Last month, Time Warner said that AOL's new focus on advertising obliged the company to move its headquarters and many high-level AOL executives to the Big Apple. At the time, the company didn't rule out layoffs -- again, not really a shocker.

Time Warner will dismiss 2,000 AOL workers worldwide, after axing 5,000 others around this time last year. This is nothing new; residents of the D.C. area are probably familiar with the company's prominent cycle of hiring and firing. (Here's a 2001 article from the Foolish archives, related to the company's days as AOL Time Warner, when it also cut 2,000 workers.)

AOL has a history of missing the proverbial boat. Flash back to 2003, when AOL was struggling with strategic missteps. Meanwhile, companies like EarthLink (Nasdaq: ELNK  ) and United Online (Nasdaq: UNTD  ) grew their subscriber bases, and telecom heavyweights like Verizon (NYSE: VZ  ) brought broadband to the masses. AOL called 2003 a "reset" year, but I'd say it's still resetting.

AOL plans to use its Internet destination and the hefty raft of well-known Time Warner content to expand its advertising network and bring in the bucks. This means taking on companies as significant as Google (Nasdaq: GOOG  ) and as hungry as Yahoo! (Nasdaq: YHOO  ) for online advertising dollars.

Time Warner sounds optimistic about the possibilities in advertising. Even in its internal memo about the layoffs (which the WSJ obtained), there seems to be an awful lot of rah-rah sentiment, even though 2,000 of the message's recipients won't be participating in AOL's new world. Personally, I think AOL's plans will be an uphill battle, especially given the company's history of just not getting it. I'm sure that existing workers' morale has taken a significant hit, too. As has been the case for ages, AOL's got a lot to prove; I wouldn't blame shareholders for skepticism.    

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