Services & Software

End of the line for AOL Instant Messenger?

Layoffs at the beleaguered Internet pioneer "eviscerates" IM unit, according to a New York Times report.

AOL CEO Tim Armstrong

It looks like AOL has stuck a fork in AOL Instant Messenger.

The Internet pioneer effectively gutted the unit Friday when it sent layoff notices to 40 employees in the company's West Coast offices, The New York Times reported today, confirming earlier rumors. A former AOL employee told the newspaper that the IM unit was "eviscerated and now only consists of support staff."

Eric van Miltenburg, senior vice president of operations, and Jason Shellen, who was overseeing AIM, are leaving the company as well, as AllThingsD reported a few days ago.

AOL reportedly rakes in $50 million in revenue annually off AIM, but nearly half of that goes to keeping the unit running. Two employees told the Times that AOL would like to see that cost reduced to about $3 million a year.

AIM long ago took a backseat to a plethora of IM and chat clients from the likes of Gchat and Facebook, but what these cuts in talent mean is that there is no one around to develop new software.

The company's news unit is expected to be targeted for cuts next, with layoffs companywide expected to include about 100 employees.

Since joining AOL in 2009, AOL CEO Tim Armstrong has struggled to reverse the beleaguered Internet pioneers sinking fortunes. Armstrong announced a reorganization of the company last December that included combining the dial-up Internet service business with its Web services.

AOL hired Armstrong away from Google with the hopes that the Web giant's advertising sales guru would help revive the ailing AOL. However, Armstrong, who is best known for developing Google's online advertising business, has had trouble competing for ad dollars with his former employer, as well as Facebook and Yahoo.