The move affects fewer than 10 percent of Netscape employees, according to an AOL representative, who added that the company plans to continue to support current versions of the Netscape browser and the Netscape Web portal.
"Netscape remains a key part of our multibrand strategy," AOL spokesman Andrew Weinstein said. "We will continue to support the browser and the portal."
The layoffs mark the latest setback for Netscape, which has fought an increasingly lopsided battle with Microsoft for browser market share. Microsoft's Internet Explorer is currently used by more than 90 percent of Web surfers, according to site visitor statistics published by Google.
Netscape suffered its latest blow at the hands of its parent last month, in aguaranteeing that AOL would offer Internet Explorer as the default browser to subscribers to its proprietary online service for the next seven years.
"If Netscape pulls back, does anyone notice?" IDC analyst Jonathan Gaw said. "These guys have been losing market share for years."
The layoffs come as the loose Mozilla.org group, which had overseen the open-source development efforts of the Mozilla browser, transforms itself into a nonprofit foundation. The foundation is funded in large part by a $2 million donation from AOL and $300,000 from Lotus founder Mitch Kapor.
Mitchell Baker, who will be president of the new Mozilla Foundation, said the group would use part of its seed funding to hire "a core group of people," which would include project managers and "key technical contributors" to the open-source project. Some of those people are expected to come from Netscape's ranks. A broad group of independent volunteers and staffers at other companies are expected to continue working on the open-source browser effort, however.
As part of the agreement with AOL, the foundation will also receive all the trademarks and logos associated with Mozilla.
AOL's purchase of Netscape, when announced in November 1998, was valued at about $4.2 billion. By the time shareholders approved the deal the following March, a run-up in the price of the price of AOL stock had.
The Mozilla open-source browser project has traveled a bumpy road over the past year. Itswas followed by a snub from Apple Computer, which in favor of another open-source technology for its Safari Web browser.
Not long afterward, last major release was distributed to the developer community late in June., working with new code in an effort to shrink the size of the program. Its
In addition to AOL, Red Hat and Sun Microsystems continue to support the Mozilla project, which could help their own push toward the use of open-source software as a replacement for Microsoft products.
CNET News.com's John Borland contributed to this report.