Although sources said Monday that the reduction is on schedule, they warned that the announcement could be delayed. They said the cuts would affect about 1,000 employees, clarifying previous estimates of "several hundred."
America Online spokesman Jim Whitney declined to comment on the anticipated layoffs. AOL employs 16,000 people.
The expected layoffs would mark the second round of cuts in the Internet unit since America Online and Time Warner merged in January. Shortly after the deal closed, the combined company slashed about 2,400 jobs. Divisions affected by the cuts included America Online, CNN, Time Inc., Warner Bros. Online, Warner Music Group and New Line Cinema.
AOL Time Warner executives have been publicly cost conscious and have set aggressive financial goals for the end of the year. The company is trying to reach $40 billion in revenue and $11 billion in earnings before interest, taxation, depreciation and amortization (EBITDA).
However, the souring economy and the collapse of advertising dollars seem to have affected the company's financial momentum. Last quarter, AOL Time Warner's revenue fell short of expectations, sparking concern on Wall Street that the company may have set its sights too high.
AOL Time Warner executives in the past have exhibited confidence that their multifaceted business would be less susceptible to a weakened economy. Executives pointed out that should advertising revenues fall, the company could fall back on its subscription businesses, including cable TV and the America Online service.
But advertising covers 25 percent of the entire company's revenue, leading Wall Street to question AOL Time Warner's immunity to the economic downturn.
"If there's overall weakness in online advertising, AOL may find a tougher business climate as well," said Jordan Rohan, an equity analyst at Wit SoundView. "Nobody is immune."