Half of the employees affected worked in America Online's Dulles, Va., headquarters, the other half in its New York offices. The interactive marketing unit, as it's called, will still employ about 600 people, the source said.
The layoffs stemmed from the recentof former Time Warner Cable executive Bob Sherman to head the unit. Sherman has begun reorganizing America Online's sales team by geographic location instead of by product category.
Most of the positions affected were involved in nonsales activities, such as account services and planning, the source said.
A company spokesman declined to comment.
AOL Time Warner is undergoing a massive retooling in the face of plummeting advertising revenue, slower subscriber growth and a general economic downturn. Last quarter, the company reported a year-over-yearexacerbated by a 31 percent decrease in its advertising and commerce business, a percentage that includes the value of intercompany advertising from other AOL Time Warner divisions.
AOL Time Warner chief operating officer Robert Pittman has sincefrom former America Online CEO Barry Schuler to lead the division to more solid financial ground. Soon after joining, Pittman appointed Sherman as AOL's sales head and named radio veteran Jimmy de Castro to oversee its AOL flagship service.
Last week, Richard Parsons offered blunt opinions about the AOL business while addressing an unruly audience at the company's shareholders meeting. Parsons described the company's poor stock performance as "a source of deep disappointment for us" and blamed the AOL division as the major reason for the stock's decline.
Nonetheless, AOL Time Warner's traditional businesses had a good year, help especially by the film division's release of its "Harry Potter" and "Lord of the Rings" franchises.