Memo From AOL CEO Falco: 10 Percent Layoffs, Internation Review

imageFor the past few years, AOL’s reorganizations and staff cuts have been driven by internal issues. This time, it’s the economy, *AOL* CEO Randy Falco told staff via a memo Wednesday afternoon, as “online marketers have tightened their ad buying across the board, reducing their spend by hundreds of millions of dollars.” The Time Warner unit will cut its workforce by 10 percent — about 700 jobs — over the next “several quarters” and will skip merit raises for 2009. It also will reorganize internationally as it tries to buy time to make it through the recession.

From the memo: “In addition to the head-count reductions and the 2009 merit pay decision, we are also making changes throughout the organization to improve efficiency and better align it to our three core businesses. This includes a review of our international operations and our global shared-services functions. In addition, we will continue throughout the year to carefully and thoroughly review all our products and services to make sure every one fully supports our strategy and has the potential for growth.”

I was told by someone familiar with the situation that new international rollouts would continue but that it would be fair to speculate this re-org will put more power over international in the hands of the execs in the U.S. leading AOL’s main groups — for instance, Bill Wilson, who heads MediaGlow (content) and Joanna Shields, who heads the People Networks. Falco promised more details from senior management in the weeks ahead.

Falco’s version of AOL is two years into a three-year plan, as he describes it, that started when he and COO Ron Grant took over as the top management team in late 2006. The unit was already in the middle of a major job reduction, cutting 26 percent of its staff — that equaled 5,000 jobs then — through layoffs and the sale of its European ISPs. A year later, after some small batches of layoffs, another major cut: 2,000 of its roughly 10,000 jobs, accompanied by a restructuring. A few months later, about 100 jobs were cut across its newly integrated ad group, Platform-A (NYSE: TWX). AOL is now down to about 7,000 staffers and will be closer to 6,000 when this reduction is over, although some hiring likely will continue.

More from Falco: “We