AOL Prepares for More Restructuring

AOL, which cut about 100 jobs earlier this week, is likely preparing for much larger reductions as it gets ready for its official spinoff from parent Time Warner Inc.

In a Securities and Exchange Commission filing Thursday, Time Warner disclosed that AOL expects to incur restructuring charges of as much as $200 million shortly after the spinoff and through the first half of 2010. While the company did not give details on the restructuring costs, much of that is likely related to a significant reduction in work force.

CEO Tim Armstrong, a former Google Inc. executive who took over AOL in March, has been giving employees regular updates on reorganization plans, and solicited suggestions from them this summer on how and where cuts could be made. One more palatable choice to flat-out layoffs could be voluntary buyout packages.

“A decision has not been made about buyouts, but it is under serious consideration,” said AOL insider who asked not to be identified. “A decision could come in a couple of weeks.”

Advertising at the AOL division fell an additional 18 percent last quarter, led by lower paid-search and display advertising on AOL sites and by reduced sales of ads on third-party sites. AOL’s operating income was cut in half.

Time Warner approved plans to spin off the AOL division in May. Once complete, AOL will be a separate, publicly traded company, ending what has largely been a failed merger, since the two combined in 2001.