The axe has duly fallen at America Online Inc and as expected, up to 8% of the staff of the combined AOL-Netscape will lose their jobs in the wake of the completion of the acquisition deal last week. Some of those Netscape employees will be offered jobs at Sun Microsystems Inc (see separate story) it seems, and those remaining at the enlarged AOL will be working in one of four divisions into which the company is being reorganized. Between 300 and 500 people will receive pink slips at each company, which represents up to 20% of Netscape’s staff. The combined company will have a headcount of about 12,000. AOL will take a charge in the current quarter, which is its third, but the amount is yet to be determined.
When AOL’s acquisition of Netscape Communications Corp was announced in November 1998, the 0.45 AOL shares for each Netscape share valued it at $4.2m, but because of the surge in AOL’s share price it ended up being worth around $10bn by last week. AOL says it will continue with the development of Navigator, Communicator – including the Mozilla open source development initiative – and expand Netcenter and client software development to non-PC devices.
The four divisions will be based on product groups. The interactive services group will focus on the core AOL and CompuServe online services, Netscape Netcenter portal and the Navigator Communicator client software, broadband services and AOL devices such as AOL-TV. Barry Shuler who previously ran AOL interactive services is president of the new group, which included many AOL and CompuServe executives and Mike Homer, who retains his position as general manager of Netcenter. The interactive properties group will look after the ICQ instant messaging, Digital Cities, direct marketing services and MovieFone, once the acquisition has been completed. It will be headed by Ted Leonsis. The Netscape enterprise group will continue the enterprise software work of Netscape and participate in the AOL-Sun alliance. Finally, the AOL international group will oversee the AOL and CompuServe services in Europe, Canada, Japan, and the forthcoming operations in Hong Kong, China and Latin America. The group will be headed by Jack Davis.
All group heads will report to president and chief operating officer Bob Pittman. Although Wall Street is expected to applaud the reorganization in the long term, AOL’s stock finished yesterday down $3.75, or 3.1% at $117.25.
