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AOL to cut up to 1,000 jobs

The company will cut 350-500 jobs from Netscape and from its own operations as details of the firm's reorganization emerge.

America Online today announced a sweeping reorganization that includes up to 1,000 job cuts divided between AOL and newly acquired Netscape Communications.

AOL will cut between 350 and 500 jobs from Netscape and a similar number from its own operations. At the maximum, the cuts would affect about 10 percent of the company's total workforce of about 10,000.

The job cuts are part of AOL's integration of Netscape, which it acquired last week in a $9 billion deal. The deal includes an alliance with Sun Microsystems.

In an email to AOL employees today, CEO Steve Case said the job cuts would be completed within a couple of weeks after a "fair process based on the alignment of specific skills to our business objectives." He added that those laid off would get "generous separation packages" as well as assistance finding new jobs.

The reorganization also creates four distinct product groups at AOL: interactive services, interactive properties, Netscape enterprise, and AOL international. Once derided by Silicon Valley insiders, the new firm will attempt to become a bicoastal company by keeping some top executives in California, according to Netscape executive Mike Homer. (See related story)

Perhaps most interesting, the Netscape enterprise group will continue Netscape's enterprise software work and collaborate with Sun Microsystems, an ally in the deal.

Sun chief operating officer Ed Zander told Netscape workers today that 1,000 employees of the Netscape enterprise group will join 1,000 Sun workers to form a joint alliance between AOL and Sun. The alliance will be headed by Mark Tolliver, now the president of Sun's consumer and embedded systems unit.

Sun has no formal plan to rehire laid-off Netscape employees, Sun spokesman David Harrah said today. "There are no connections between any layoffs...and the formation of an alliance group between the two companies," he said.

Harrah described the Sun-AOL alliance as a "virtual business unit."

The new unit will work on e-commerce software and "enterprise portal software"--the collection of intranet and extranet programs a company might need to tie employees and customers together from several locations for tasks such as information exchange or order placing. However, Harrah declined to provide specifics such as details on the future of two competing application servers products from Sun and Netscape.

"How the roadmaps come together is a subject for another day," he said.

Tolliver will be president and general manager of the strategic alliance between AOL and Sun. He will be in charge of sales, professional services, and support.

Barry Ariko, who is now COO of Netscape, will become the senior vice president of the Netscape enterprise group within AOL.

Steve Sauvignano, now in charge of Netscape e-commerce software, will be senior vice president within the new enterprise group, according to sources. He will also lead the team developing e-commerce applications for Sun-AOL's strategic alliance.

AOL's meat and potatoes: interactive services
Headed by AOL's Barry Schuler as president and CompuServe's Mayo Stuntz, the interactive services unit will comprise the domestic AOL and CompuServe Internet service and content provider operations; Netscape's Netcenter portal, and the Netscape Communicator browser; broadband operations and AOL devices, which includes AOL-TV.

Mike Homer, Netscape's executive vice president and general manager of Netcenter, will become senior vice president and general manger of the portal site under AOL.

AOL will promote Netscape's Netcenter portal, whose 13 million registered users will give AOL's evening-intensive traffic a needed boost in daytime hours. Netcenter has a high concentration of daytime users, who access the site from work.

AOL reiterated its previously stated support for Netscape's client development, both the open-source Mozilla.org group and the Netscape-branded product. The company, which uses a version of rival Microsoft's Internet Explorer browser with its own client, made no mention of any plans to switch to Netscape's Communicator product.

"Interactive" properties and International group
Headed by Ted Leonsis, the interactive properties unit is made up of separately branded properties, such as the ICQ messaging service and the content wing Digital City. MovieFone will join the unit once AOL completes its acquisition of that company.

The international group includes AOL's CompuServe unit's foreign operations and other AOL operations outside the United States.

The four groups will report to AOL chief executive Bob Pittman.

As previously reported, AOL summoned Netscape employees to a morning meeting, where executives outlined a merger schema dubbed "Silicon eyeballs." Under this schema, Sun brings to the table hardware and services, Netscape brings software, and AOL brings "eyeballs" with its vast membership rolls.

Netscape's former chief executive Jim Barksdale, who will join AOL's board of directors but will not hold an executive position there, received two standing ovations from the assembled troops.

One Netscape employee described the meeting as "a defining moment for the company."

"I'm very excited," said Jed Kleckner, an engineer in the enterprise software group. "The train is leaving the station, and we're moving onto the next phase.

Kleckner, a four-year Netscape veteran, said he was not concerned about layoffs. Officials told the assembled Netscape troops that they would find out more about their job status within two weeks.

Krista Talley, a senior financial analyst who has been with Netscape for two years, said she was concerned about the layoffs but that they came as no surprise. She added that an expected severance package would help see laid-off employees through their transitions.

AOL shares ended the day at 117.1250, down 3.875, after trading as low as 112.5. Brown Brothers Harriman downgraded AOL to short-term "neutral" from short-term "buy," but kept its long-term "buy" rating on the stock.

Sun shares ended up 3.4375 to 113.3125.