AOL: Small Layoff Today, a Voluntary Buyout and, Then…the Big One

Essentially–although AOL is located in New York and not California–it’s going to be like tremors before the Big One at the online company today, as about 100 employees are laid off.

Sources said the cuts, first reported by Valleywag’s Ryan Tate, will be widespread across AOL, even as the company inches ever closer to being spun off from its corporate overlord, Time Warner (TWX).

That will come within the next month, once the spate of regulatory comments and approvals is in place, said sources.

And during this time, AOL CEO Tim Armstrong’s “Project Everest”–the code name for cost-cutting across the company–will be chugging along to its final destination.

After tomorrow’s small cut, sources said, Armstrong has told employees he is seriously considering a suggestion made to him on a listening tour of AOL, which he took in his first 100 days on the job, of asking for voluntary departures that would include some sort of buyout.

It’s unlikely that that will be enough to achieve the kinds of cuts needed to bring costs in line with depressed revenue at AOL.

At its third-quarter earnings call last week, Time Warner reported that AOL revenue was down 23 percent. In addition, subscription revenue, which will continue to shrink, was down another 29 percent, and advertising revenue, which is supposed to improve one day, was down 18 percent.

Thus, with that performance, AOL is likely to do a massive layoff of upward of 1,000 employees.

That action will take place right before or, more likely, at the same time or right after the spinoff.

In other words, not very happy holidays for some.

But AOL is not alone in making cuts in the tech space. Last week, both Microsoft (MSFT) and RealNetworks (RNWK) laid off staff, as did Electronic Arts (ERTS) yesterday.

Here is a recent interview I did, while in Germany, with Armstrong, where he talked about AOL’s prospects: