AOL Set for More Job Cuts

Struggling to please Wall Street in a slowing economy, AOL Time Warner Inc. is preparing to announce several hundred job cuts at its online division, perhaps as soon as this week.

Cuts at other AOL Time Warner units are also a possibility, analysts said.

The layoffs at the Dulles, Va.-based Internet unit, which executives frequently call the company’s crown jewel, would mark the second round of job cuts this year. In a companywide restructuring in January, the online unit lost 725 jobs, or about 5% of its worldwide work force.

Officials at AOL declined to comment Monday.

Analysts said AOL executives began telling investors earlier this month to expect additional cost-cutting and layoffs in the near future.

The New York media giant disappointed Wall Street last month by revealing a worse-than-expected slowdown in revenue growth for the second quarter, causing the company’s stock price to drop 10%. Revenue at the AOL unit rose 13% to $2.1 billion, but some analysts had expected growth of 20%.

AOL Time Warner executives are sticking with their aggressive financial targets, set as part of the blockbuster merger between AOL and Time Warner in January. The company expects 2001 revenue to grow more than 12% to $40 billion and earnings before interest, taxes, depreciation and amortization, or EBITDA, to increase 30% to $11 billion.

“They’re in a tough economic environment, coupled with an initiative to increase EBITDA by a significant margin,” said Rob Martin, analyst at Friedman, Billings, Ramsey & Co. “Things are more difficult than they originally anticipated they would be.”

He said other AOL Time Warner units are also vulnerable to job cuts, though he predicted the company’s fast-growing cable division would not be affected.

AOL Time Warner shares fell again Monday, closing at $42.99, down $1.31, in New York Stock Exchange trading.