Stock of the Day
|
America Online (AOL)
America Online Cuts More Than 700 Employees
Dulles, VA- headquartered Time Warner Inc.'s AOL segment laid off more than 700 employees within its internet division this week. Most of the cuts came from AOL's dial-up service operations, in response to the ongoing decline in subscribers for its dial-up Internet-access services and an increased base of "computer-savvy" users that do a lot of their own troubleshooting. With these staff reductions, AOL hopes to be "better positioned to remain flexible, nimble and competitive" in a changing market, according to AOL spokesman Nicholas J. Graham.
|
| Daily Chart |
If you are not able to see the chart, your email client probably does not support javascript. To view it, please click here
|
| Stock Analysis |
Under the plan, AOL is closing its member-service call centers in Orlando. It is also cutting positions at Dulles, as well as at centers in Tucson and Jacksonville. Altogether, the cuts amount to about 4 percent of AOL's 20,000 global work force. This news came as a surprise, since the company hasn't announced layoffs of this magnitude since December 2004. Some analysts believe that these job cuts come at the right time, as wake-up call, since the number of subscribers has dropped significantly so far this year. For example, as of June 30, AOL had 20.8 million U.S. members, down 917,000 from the March quarter and 2.6 million from a year earlier. In Europe, AOL had 6.2 million members, down 99,000 from the previous quarter and 80,000 from a year earlier
|
The cuts respond to AOL's "ongoing process to better align their resources and continue to respond to a changing marketplace," said Graham. Further, as a result of these structural and strategic transformations, AOL hopes to be better prepared and competitive in the market, thus "enabling them to expand existing audiences, and reach new ones, online." Apart from these plans, a number of companies are interested in taking a stake in AOL's growing, advertising-supported online content business, including Microsoft Corp., Yahoo Corp., and a team-up of Google Inc. and Comcast Corp. Mostly, these competitors are attracted to the AOL.com portal and its ability to take advantage of industry-wide growth in online advertising. However, the companies are not interested in AOL's Internet service business, which is large and highly profitable but also in decline as consumers shift to faster broadband access services.
|
AOL's shares rose 6 cents to $17.79 Wednesday on the New York Stock Exchange. It will be interesting to see if AOL's job cutting strategy to expand into new markets will meet its high expectations. Graham is confident about this approach and believes that "the company is at a point in time where it makes sense to realign their access business." It is surely a stock to watch over the next few months.
|
Profile |
Time Warner, Inc. operates as a media and entertainment company. It operates in five segments: America Online, Inc. (AOL), Cable, Filmed Entertainment, Network, and Publishing. AOL segment provides interactive services, Web brands, Internet technologies, and e-commerce services in the United States and Europe.
|
|
|
|
|
