AOL plans to cut one-third of its workforce, or about 2,500 jobs, in an effort to trim some $300 million in annual costs as part of the Internet company's planned spin-off from Time Warner Inc.
The struggling Web pioneer, which is now focused primarily on advertising-supported content, said on Thursday that it would start with a volunteer buyout program and move on to involuntary layoffs if enough workers do not step up.
AOL said the layoffs would result in restructuring charges of up to $200 million, which it announced last week. It said that substantially all the charges would be incurred from the date of the spin-off through the first half of 2010.
Earlier this week, Time Warner said the spin off will take place on December 9, nine tumultuous years after one of the most disastrous corporate mergers in history.
When AOL's plan to merge with Time Warner was announced in January 2000, the Internet company was valued at $163 billion.
The combination was meant to herald the future of content distribution via the Internet, but the promised benefits were never achieved.
The December spin-off is expected to effectively value AOL's market capitalization at around $3 billion.
AOL said that Chief Executive Tim Armstrong told employees of the layoff plan via video and email, and said that he was going to forgo his own bonus for 2009.
Armstrong, formerly at Google Inc, was appointed in March to prepare AOL for becoming an independent entity.
The company, which has been examining its cost structure for the last four months, said the voluntary layoff program will begin on December 4 and run through to December 11, and gives people more choice than if they waited for final cost recommendations.
The layoffs start in the United States, where AOL employs about 4,500 people, and will extend to the company's global operations, the company said.
Time Warner shares were down $1.12, or 3.4 percent, to $31.70 on the New York Stock Exchange. The overall Dow Jones Industrial Average is down 1.3 percent on the day.
(Reporting by Franklin Paul and Sinead Carew; Editing by Derek Caney)