AOL Time Warner slashed more than 2,000 jobs Tuesday and said an additional 3,800 at the company's Warner Bros. retail stores could be axed as the New York-based media giant moved swiftly to streamline operations and cut redundancy after its Jan. 11 merger.
Combined with 400 layoffs announced last week at the company's cable network CNN, the latest round of cuts immediately shrinks AOL Time Warner's size by about 3%.
"In no area are we cutting into the muscle of the company," said AOL Time Warner spokesman Ed Adler. "We need that muscle to grow and compete. These changes will sharpen our focus, capture synergies for growth and strengthen the integration of our company."
Because of its larger size, the former Time Warner bore the brunt of the cuts, which occurred throughout the entertainment company's movie, music and publishing empire.
But eager to prove that AOL was not getting preferential treatment, executives also ordered a total of 725 jobs eliminated throughout the America Online operation, including about 300 at the Internet company's former headquarters in Dulles, Va.
As part of its reorganization, AOL Time Warner said it plans to sell its 130-store chain of Warner Bros. retail shops. The theme-oriented stores have been a disappointment to Time Warner, though the company does not break out separate financial figures. Even before the merger, Time Warner had been closing some of the stores.
"We don't have to own the stores to capture the strategic value," Adler said.
If a buyer cannot be found, the stores will be closed and the 3,800 employees laid off.
That would bring total job cuts since the merger closed to 6,225, or more than 7% of AOL Time Warner's work force.
Time Warner's music group plans to cut 600 positions through early retirements, attrition and buyouts offered to employees with at least 10 years on the job. Unaffected are people with employment contracts, such as label heads, marketing specialists and A&R executives who find and sign new acts.
An additional 400 pink slips hit Time Inc., chiefly related to the closure of an Alabama operations center and cuts at a Time-Life direct-marketing unit in Alexandria, Va.
New Line Cinema will shave 100 jobs in Los Angeles and New York; another 100 workers at Warner's Entertaindom.com in Burbank were fired; and 100 cuts were made at AOL Time Warner headquarters in New York's Rockefeller Center, particularly in its information-technology division.
Employees, who learned of the cuts in meetings Tuesday, have been bracing for layoffs for weeks. Co-chief operating officers Robert W. Pittman and Richard D. Parsons warned layoffs were likely, though they promised the numbers would not be substantial.
Analysts say AOL Time Warner is moving aggressively to cut costs in order to meet its goals for revenue and cash-flow growth. AOL Time Warner is scheduled to announce its first earnings as a combined company Jan. 31.
A slowing economy and falling advertising revenue have raised doubts about AOL Time Warner's ability to hit its original targets of 12% to 15% revenue growth and 30% growth for cash flow.
"They are going to need to tighten the reins if they want to make their numbers," said Stephanie O'Neil, analyst at Friedman Billings Ramsey.
Even without the merger, layoffs would have been likely, she added. Numerous other Internet and entertainment companies, including ABC, have been slicing jobs in recent months.
Layoffs at AOL occurred across the board, ranging from senior vice presidents to secretaries.
The cuts were not as deep as in 1999, when AOL eliminated 825 jobs in the weeks after its acquisition of Netscape Communications. At the time, that represented about 7% of AOL's total work force.
Warner Bros. motion picture and television operations were, at least for now, spared staff cuts, though the studio is looking to slash as much as $100 million from its annual overhead. The studio represents 20% of the combined gross of AOL Time Warner.
Studio Chairman Barry Meyer and President Alan Horn have been taking a hard look at costs since taking over the studio in August 1999 from veterans Bob Daly and Terry Semel.
"Barry and I are continuing the process of reviewing every facet of Warner Bros., from production deals to travel and entertainment expenses, to see how we can do things more efficiently and spend less where appropriate," Horn said Tuesday. "The first places we're looking are attrition and new hires, but we will not be engaging in wholesale reductions."
A Time Warner official said that other divisions, including Home Box Office, the WB network and Time Warner cable, were also spared employee cutbacks.