AOL layoffs slam Sun-Netscape Alliance
iPlanet, a much-touted alliance between America Online and Sun Microsystems, will shed 500 employees as part of a painful restructuring at AOL.
AOL announced Tuesday that it is cutting 1,200 jobs and taking a charge of up to $125 million as part of a significant reorganization. In addition, AOL said it is eliminating 500 positions at iPlanet.
After the layoffs, iPlanet will largely be a Sun satellite. As of last July, only one-third of iPlanet's approximately 3,000 employees were from AOL, Sun Chief Financial Officer Mike Lehman said. Lehman has further said that Sun largely owns iPlanet's intellectual property.
If Sun does not eliminate any positions, about 20 percent of the remaining employees would be from AOL, a unit of AOL Time Warner.
iPlanet's software runs on servers that handle tasks such as sending and receiving e-mail, hosting Web sites, running computized calendars for employees, or creating company portal sites. iPlanet engineers are working on advanced instant messaging software for corporate customers called Project RAC, or iPlanet Instant Messenger. Project RAC could eventually compete with instant messaging software from Microsoft and IBM's Lotus group.
Formed in March 1999 as part of AOL's purchase of Netscape Communications, iPlanet was slated to last three years. It is now moving toward "a transitional stage," the AOL representative said.
In April 1999, Sun CEO Scott McNealy said he expected the alliance to pay off in 2000. "We're invested heavily" he said at the time. "I think it's going very well, but don't expect it to hit escape velocity for another 12 months."
The companies originally envisioned that the alliance would help the two companies sell Sun and Netscape server software, such as application servers or Web servers, to telecommunications companies and large corporations. Sun also hoped to sell additional hardware and services with the assistance of iPlanet. Before being acquired by AOL, Netscape had tried to sell server software with moderate success.
The Sun-AOL effort has met with some acceptance, but the duo has not cracked the dominance of IBM and BEA Systems in the market for application servers. Hewlett-Packard, through its acquisition of Bluestone, is also trying to gain a larger part of this market.
Earlier this month, iPlanet said it would announce on Aug. 27 a new direction that would make it easier for companies to tie existing software packages together--a product category known as application integration.