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AOL Lays Off 500 At Netscape

America Online Inc. said Wednesday that it will cut up to 20 percent of Netscape's staff, or up to 500 workers, as it absorbs the pioneering software maker in a $10 billion acquisition.

AOL also plans to cut 350 to 500 workers from its own 10,000-person staff. (Editor's note: CBS News is the broadcast news provider for America Online.)

The cuts in Netscape's 2,500-person work force, mainly in its Mountain View, Calif., headquarters, should hit such back-office operations as accounting but largely leave alone Netscape's coveted group of 550 software developers and managers, financial analysts said.

The cuts underscore the risks in one of the software industry's biggest marriages, which was completed last week to create a new Internet behemoth with two of the leading Web destinations.

AOL, based in Dulles, Va., is the largest online service and Internet access provider. Netscape's founders created the first widely used software for finding and retrieving information off the Internet.

AOL's challenge is to cut jobs without hurting morale and spurring defections of the Netscape software designers it hopes to enlist to enhance its Internet services.

The mood at Netscape was uncertain but hardly dismal late Tuesday. Several workers, contacted by telephone, expressed optimism they could easily get other jobs in Silicon Valley, a booming engine of U.S. economic growth. Many will be able to exercise options to buy stock that could yield handsome profits.

Others said they might find jobs in one of the acquiring companies. In addition to AOL, Sun Microsystems Inc., a maker of business computers and software, is a partner in the deal.

"There are three different companies involved here, and there is quite a good chance that one layoff at Netscape could mean a new job at AOL or Sun. In that case, it's not exactly a layoff," said Pierre Theveny, Netscape's information system manager in Paris. Theveny said he had not heard yet whether he would be laid off.

"I'm sorry some people have lost their jobs but I suspect these people will be well taken care of; they also have stocks," said one employee who works in Netscape's electronic-commerce unit, who like other workers, requested anonymity.

"The point is we don't need two CFOs or two general counsels or two heads of (human resources)," he added.

Ullas Naik, an analyst with First Albany Corp., said he expected the companies to spare departments such as marketing because they target such different customers.

While Netscape created the tool for people to surf the Net and makes software for corporate computer networks, AOL supplies neatly organized channels of information for Internet beginners who otherwise might be groping their way through.

Shares of AOL fell 3 7/8 to 117 1/8 Wednesday on the New York Stock Exchange.

Written By David E. Kalish, AP Business Writer