As AOL prepares to spin off from Time Warner in an IPO, it wants to gussy itself up so that it looks as appealing as possible tp ublic investors. Today, AOL disclosed that it plans yet another restructuring which could cost as much as $200 million. The biggest cost savings from any restructuring is usually through layoffs, and the latest round has already started at AOL, with 100 let go this week and as many as 1,000 of its 6,000 jobs at risk of being eliminated.
Despite new leadership under CEO Tim Armstrong, AOL has yet to turn around financially. Last quarter, revenues sank 23 percent to $777 million. The biggest drop came from subscription revenues to its legacy Internet access business, down 29 percent, but advertising revenues also took a hit, down 18 percent. AOL depends on display advertising, which has not yet rebounded like search advertising appears to be doing.
By cleaning up house and removing as many costs as possible before the IPO, Armstrong is trying to make AOL as lean as possible. But eliminating salaries and benefits can only go so far. He has to show that his new content strategy can create actual growth as well.