Want CNET to notify you of price drops and the latest stories?

Hundreds of Netscape job cuts on table

AOL executives are expected to work this weekend to complete a merger plan that could result in several hundred job cuts among Netscape's ranks.

Paul Festa Staff Writer, CNET News.com
Paul Festa
covers browser development and Web standards.
Paul Festa
3 min read
Executives of America Online are expected to work through the weekend to complete a plan for its merger with Netscape Communications that could result in several hundred job cuts among Netscape's ranks, sources said.

Netscape's transition team is expecting layoffs in the neighborhood of 750 people, a source familiar with the matter said today. Others, however, cautioned that a figure had not been set and could be significantly lower.

An announcement on the possible cutbacks is expected next week. In keeping with Netscape's former practices, this source said, management will then give employees the opportunity to volunteer to accept a severance package of several months' pay. Only after volunteers have come forward will Netscape proceed with the remainder of the cuts.

"For people who have been thinking about leaving the company, this will be a blessing in disguise," said the source, who spoke on condition of anonymity. The full extent of the layoffs may not be felt for as long as three to six months.

Netscape is not expected to ax all 750 at once. Some divisions, such as the professional services group that helps firms get their Netscape servers up and running, have outstanding contracts that need to be fulfilled before workers can be laid off.

Another source close to Netscape said some units would be spared cuts altogether and are even slated for new hires in coming months.

AOL and Netscape declined comment yesterday on the layoff possibilities. "We will have more information next week about how the two companies will operate," AOL spokesman Jim Whitney said. A Netscape spokeswoman labeled any discussions of layoffs "premature at this point."

The cutback issue stems from job duplication resulting from AOL's $8.98 billion buyout of Netscape, which was approved by Netscape shareholders on Wednesday. The buyout also calls for Sun Microsystems to market Netscape's enterprise software.

Areas of duplication at AOL and Netscape could include corporate administration, sales, and Web sites. Also, some of Netscape's software overlaps with Sun's, such as applications servers from Netscape's Kiva operation and Sun's NetDynamics business.

Discussion of plans to integrate the two companies have accelerated since the deal closed.

The Street.com, an online financial publication, reported that Netscape is close to laying off as many as 700 employees, or 30 percent of its workforce, as a result of the merger.

However, sources said that a figure still was being ironed out, with a goal toward minimizing the impact on the Netscape rank and file. For example, some of the workers could be transferred to Sun, which has many job openings of its own.

Netscape workers were anxiously awaiting the outcome. "There is not a lot of confidence around here," said one Netscape manager, who asked not to be named.

Wall Street analysts were mixed on the possibility of job cuts yesterday.

"We could see a 10 to 20 percent reduction," speculated James Preissler of PaineWebber. "I don't think that's unlikely."

Preissler expects the sales force and administrative personnel to bear the brunt of the layoffs. "They'll keep programmers and engineering, and I think Netcenter will remain intact for the most part."

Others were skeptical. "I don't expect any major layoffs," said Ulric Weil, senior technology analyst at Friedman Billings Ramsey, who said he's had no indication from AOL chief executive Steve Case that any significant number of Netscape's workers will be furloughed.

If cuts do occur, keeping operations on both coasts--AOL in Virginia and Netscape in California--will help minimize the impact, Weil said.

Netscape CEO Jim Barksdale will join AOL's board but not remain active in management. Cofounder Marc Andreessen will become AOL's chief technology officer. AOL had promised Netscape employees one month's pay if they stayed on until the deal closed.