Watch CBSN Live

AOL Slashes 1,300 Jobs

AOL said Tuesday it has done such a good job of helping its customers help themselves that it is cutting about 1,300 customer-service jobs and closing its Jacksonville, Fla., call center.

The layoffs, many also coming from service centers in Ogden, Utah, and Tucson, Ariz., amount to about 7 percent of AOL's work force worldwide and are the largest since the Time Warner Inc. Internet unit cut about 700 positions last fall.

"AOL is going through some major changes. Its dial-up Internet business has declined and it's expanding its free Web-based services such as email, news and search," says CBS News Tech analyst Larry Magid. "This type of activity doesn't require the level of hand holding that's necessary with a dial-up Internet provider."

"There is never an easy time to do this," AOL spokesman Nicholas Graham said. "But the steps we take today will help ensure that AOL meets the needs of our members, meets our strategic corporate goals and sustains the growth of our business."

Tracy Carpe, who has worked at the Jacksonville center since February, seemed resigned to the layoffs as she walked into her final day at work.

"I just want to get my check and go," Carpe said.

AOL's subscription base has been declining as more Internet users drop dial-up connections in favor of broadband. The company had 18.6 million U.S. subscribers as of March 31, down from a peak of 26.7 million in September 2002.

"The Internet world of 2006 is very different from the world of 1996 when AOL first established these member centers," Graham said. "Today, AOL members are more savvy and sophisticated online. They are very different members today than they were in 1996."

In its early days, AOL had a reputation for attracting beginners, leading some longtime users to deride the service as the "Internet on training wheels."

But AOL dropped some of its hand-holding over the years and began offering its subscribers computer-diagnosis, anti-spyware and other free software, "allowing them to troubleshoot on their own," Graham said.

In addition, he said, AOL has been expanding its online help areas, such that 8 million customers a month now look up information themselves online, compared with 5.5 million who interact with a human by phone, e-mail or online chat.

"They are able to accomplish with a couple of clicks what it used to take them a phone call or two or three to accomplish," Graham said.

But Magid says the layoffs are due to more than just increasingly tech-savvy customers. "AOL says that it's laying off support people because calls are down by 50 percent thanks to more Internet-savvy customers and more stable software. That may be true but it's also true that AOL's subscriber base is down by more than 20 percent and that it's shifting a lot of its business over to free Internet services."

AOL's decision to close its Jacksonville center and lay off 780 employees was effective immediately. It was laying off 125 in Ogden, also effective immediately, leaving 400 positions. More than 500 will remain employed in Tucson after the 300-employee reduction there effective June 30.

AOL is also making nominal reductions in other locations such as Albuquerque, N.M., and the company's headquarters in Dulles, Va. AOL also has a call center in Oklahoma City, which the company said is unaffected.

The company is offering severance packages that will extend pay and benefits as late as August.

Last October's reductions of 700 jobs also were mainly in call centers and included the closing of its Orlando, Fla., location.

In late 2004, AOL laid off another 700 employees as the company shifted its focus to its free advertising-supported sites instead of its declining business of Internet access subscriptions. In 2003, the company also cut about 450 technology and 425 call-center positions.

Shares in Time Warner were up 1 cent at $17.06 in afternoon trading Tuesday on the New York Stock Exchange.