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1,000 jobs to go at AOL

America Online Inc. announced Wednesday that it is restructuring its company to speed the digestion of Netscape Communications Corp. -- a move that could slash as many as 1,000 jobs between the two companies.
Written by ZDNet UK, Contributor

According to AOL and Netscape officials, between 350 and 500 jobs will be axed at each company, potentially reducing the combined workforces by as much as 10 percent.

In AOL's restructuring, the Internet access behemoth will now comprise four divisions: interactive services, interactive properties, Netscape enterprise software and AOL international. "Instead of bolting Netscape on the side, [AOL] has reorganised their entire company," said Mike Homer, who will spearhead the Netcenter portal under AOL's umbrella.

Homer said no particular area will be hit especially hard with layoffs, because most decisions will be made on a group-by-group basis. The final verdict for all Netscape employees, he said, will be made in the coming days. "We want the entire organisation rolled out and all employees notified within two weeks... at the latest," he said.

Netscape employees caught wind of the restructuring and layoffs this morning during an "all hands" meeting in two massive tents on its Mountain View, California, campus. Outgoing Netscape boss Jim Barksdale and AOL executives Barry Schuler and Bob Pittman outlined the company's new blueprints during the 90-minute meeting.

Meeting security was extremely tight. Red-jacketed guards patrolled parking lots and the areas around the tents, refusing to let anyone without a Netscape employee badge within 50 feet of the entrance. At the entrance, badges were checked again. Anyone seen loitering around the area was asked to leave. Security guards went so far as to escort outsiders to their cars and watch them drive off campus, noting license plate numbers and the make and model of cars.

AOL's purchase of Netscape became official last week after Netscape stockholders approved the deal, which was worth $10.2bn (£6.2bn) after accounting for an AOL stock split. Sun Microsystems Inc. also played a pivotal role in the deal, helping develop and sell Netscape's enterprise products in the future. AOL said all of its Netscape-branded operations -- the enterprise business, groupware and browser product development teams and the Netcenter portal -- will remain in Mountain View, California., AOL said. In addition, the company said it plans to release -- as planned -- Version 5.0 of Communicator and Navigator later this year, and plans to work to promote its browser technology for use on non-PC "next-generation" Internet devices.

AOL also said it will not make Navigator the default browser within the client software it distributes to the more than 16 million members of its popular consumer online service because of an exclusive licensing arrangement with Microsoft that allows the AOL service to be promoted on the Windows desktop. "We will continue to offer Internet Explorere as the default browser because we believe it important to be bundled with Windows," AOL spokesman Jim Whitney said, adding that AOL's licensing deal with Microsoft extends for "several years." Navigator, however, is offered as an optional downloadable feature to AOL users who may wish to use the browser, Whitney said.

Still largely unanswered for resellers, however, is the million-dollar question: How will Sun and Netscape products -- and channel forces -- converge?

For starters, Sun and AOL have named Mark Tolliver president of the product-development alliance the companies announced in November. Using Netscape, Sun and AOL source code, the companies will provide turnkey e-commerce solutions, software and consulting services. First customer ship of all software is on Solaris, although Windows NT is also a preferred platform. Tolliver previously headed Sun's consumer and embedded division. Former Netscape COO Barry Ariko was named executive VP of the alliance. Senior VPs include Steve Savignano, former general manager of Netscape's e-commerce applications products division, and Stuart Wells, former VP of Sun's network software group.

It is unclear when the companies will start selling each other's products. One source said Netscape software might not hit Sun's price list until July. In an interview last week Wells said Sun's plan is to sell individual products and create a migration path for customers toward an e-commerce architecture. The companies are also figuring out how to meld their cultures. "Sun has never been successful selling enterprise software, and Netscape has not been successful for different reasons -- lack of resources," said one source. "If we do this right, we can really take names and kick butt, but if we take two broken organisations and try to fit them together, this deal is not going to work."

The source said that while AOL is being "tight-fisted," Sun will try to pick up as many laid-off Netscape employees as is feasible. Sun's latest 10Q lays out portions of its agreement with AOL, which includes safeguards for ensuring the deal's success. For instance, the companies have outlined revenue guarantees from Sun to AOL and regular meetings between executives to monitor progress. The agreement spans three years.

Sun and Netscape are expected to announce product roadmaps and blueprints next week.

Inter@ctive Week's Connie Guglielmo contributed to this report

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