AOL To Lay Off 5,000 Employees

AOL said Thursday it expects to drop as many as 5,000 employees, or a quarter of its global work force, within six months as the company restructures its business to draw more online advertising dollars.

The announcement came a day after the Time Warner Inc. unit said it would no longer charge high-speed Internet customers for e-mail and other services.

AOL still has more than 17 million subscribers who pay a monthly access fee, reports CBS News correspondent Anthony Mason, but that's down 9 million from its peak nearly four years ago – and still falling fast.

An unknown number of European employees will still have jobs but with a different company as AOL looks to shed its Internet access businesses in France, Germany and the United Kingdom. AOL currently has 3,000 access employees in Europe.

But massive layoffs around the world are expected as the Dulles, Va., company stops actively marketing its dial-up services in the United States and reduces its need for customer-support centers.

Employees were informed of the work force plans at a companywide meeting and Webcast Thursday. Specific notifications are expected by October.

Layoffs had been anticipated. In announcing AOL's strategy shift Wednesday, Time Warner said it expected to spend $250 million to $350 million through 2007 to implement the changes, about half of that for employee severance.

The cuts follow several rounds in recent years, including about 1,300 customer-service jobs announced in May. AOL currently employs 19,000 around the world.

Millions of AOL subscribers are expected to stop paying as much as $26 a month for AOL plans, which include technical support via telephone, now that the company is giving away AOL.com e-mail accounts and various software previously reserved for paying customers.

The move marked AOL's latest efforts to stop a long, steady decline in Internet subscribers as more Americans get high-speed service through a cable or phone company.

AOL's European units have also been losing subscribers. Time Warner said Wednesday it was considering a sale of its European access businesses and anticipates a deal this year. AOL has entered into exclusive negotiations with Neuf Cegetel for the French business.

Shares in Time Warner closed down 2 cents at $16.65 Thursday on the New York Stock Exchange.