AOL to cut 500 jobs, mostly in corporate units: source

November 17, 2016 9:57 AM EST

The AOL logo is seen at the company's office in New York November 5, 2013. REUTERS/Andrew Kelly


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By Malathi Nayak

(Reuters) - Verizon Communications Inc's (NYSE: VZ) AOL digital media unit will lay off 5 percent of its workforce, or about 500 people, to consolidate operations after recent acquisitions, a person familiar with the situation said on Thursday.

Most of the cuts will be in corporate units, including human resources, finance, marketing and communications, while resources will be shifted to AOL's mobile, video and data businesses, the source said.

Chief Executive Officer Tim Armstrong informed employees about the cuts in an email on Thursday morning.

"Due to the deals we have done over the past 12 months, we have added over 1,500 new people to the company," Armstrong said in the email seen by Reuters. "As we have settled into those changes, there are a number of areas that require consolidation to improve operations and limit the amount of hand-offs in our business processes."

Verizon bought AOL for $4.4 billion in July of last year, betting that a push into mobile video and targeted advertising could help it tap into revenue outside the saturated wireless market.

Following that, AOL struck a deal to handle much of Microsoft Corp's (NASDAQ: MSFT) advertising technology business and bought ad tech firm Millennial Media for about $250 million.

The latest cuts do not stem from Verizon's planned purchase of Yahoo Inc's (NASDAQ: YHOO) core internet properties for $4.83 billion. Verizon, the No. 1 U.S. wireless provider, said in July it plans to combine Yahoo's websites, search, email and advertising technology tools with similar assets of its AOL unit.

In September, Yahoo disclosed it had suffered a data breach in 2014 involving 500 million email accounts that compromised user information. This has raised questions about whether Verizon would scrap the deal or renegotiate it.

Verizon executives have said in recent weeks they are still evaluating what the data breach may mean for the Yahoo transaction.

Technology news site Recode first reported the AOL job cuts in an interview with Armstrong.

(Reporting by Malathi Nayak in Washington and Rishika Sadam in Bengaluru; Editing by Lisa Von Ahn and Jeffrey Benkoe)



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