AOL List: Damage Control

David Cassel (
Wed, 13 Nov 1996 14:31:48 -0800 (PST)

			D a m a g e   C o n t r o l


"America Online Cuts Its Staff by 5%" read the headline in today's Wall
Street Journal.  "The nation's largest on-line service handed pink slips
to roughly 200 people in its various Virginia facilities," as well as
employees in Vero Beach, Florida and Berkeley.  Dozens more will be
transferred from the Berkeley facility to a content developer in San
Mateo, California papers reported.  Engineers, programmers, content
developers--axed. "For the first time since 1990, when it was a fledgling
company with 150 employees, America Online yesterday reduced its staff,
laying off 300 people," read the lead in Newsday.

But despite the measures, AOL still can't shake investor cynicism. "Wall
Street definitely appreciates a streamlining," Peter Krasilovsky of Arlen
Communications told Newsday, "and AOL is very focused on driving up their
stock price, so this may be a beauty makeover." "[P]robably window
dressing with a definite eye on Wall Street," he told the Washington Post. 
"If AOL can't get its price up, it won't be able to do many of its
expansion plans." 

AOL denied rumors that this was a tactic to save money.  "This is not
downsizing," spokeswoman Pam McGraw told C|Net.  Mark Stavish, AOL's Vice
President of Human Resources, offered a vaguer spin, telling the Post the
300 terminations were to "make sure that we're re-aligned and that people
are focused on their new missions."  "They're adding low-paid jobs and
cutting some of the higher-paid divisions," Krasilovsky added. 

There's more bad news.  6% of AOL stock shares were put on the market by
the parent corporation of Fidelity Funds.  As one of the nation's largest
investment firms, they'd owned 11.1 percent of AOL's stock; yesterday they
announced they'd dumped almost two-thirds of it.  "America Online declined
immediate comment," the AP wrote, quoting an investor as saying AOL's new
business models may have spooked the firm. 

Possibly hoping to counter unfavorable publicity, AOL issued a press
release today saying PC Magazine ranked them highest "among online
Internet services".  There's just one problem--the magazine actually said
"Online Services".  "If you want to step into the Internet pool -- but also
retain the comfort...of an online service--AOL is a good choice."  AOL
wasn't compared with thousands of ISP's across the country. 

Case defended the designation earlier last month.  "Some of this is a
technology-centric semantics debate that I think is lost on consumers," he
said in our conference call.  "Alot of the technology jargon we take for
granted is something alot of consumers are kind of bored with."  Fair
enough.  But in this case, the blurred distinction is working in AOL's

The press release also quoted PC Magazine as saying "AOL's technical
support is very good"--but ironically, 30% of today's cuts come from
technical support and billing. "Employees interviewed on the basis that
their names not be used said the pink slips came as a complete surprise,"
the Washington Post noted.  It was revealed that the $75 million charge
announced two weeks ago included their severance pay--including salary
benefits, and job assistance.  

"AOL and fellow computer service networks are losing customers to low-cost
Internet service providers," the AP added to their story.  But analysts
are still mulling the implications of the fact that within two years,
AOL's acquisitions of Redgate and GNN were jettisoned. 


The Atlanta Journal-Constitution's NetWatch noted that Sanford Wallace
used a "Netiquette-busting all-capitals style" to scream "WE WANT SOME OF

But they also reported that "Dave Cassel's AOL List" quoted 
the Sunday e-mail message.  Not yet it hasn't yet...

[That story is scheduled for later in the week.]

           Dave Cassel
           More Information -

 Please forward with subscription information and headers in-tact.

 To subscribe to this moderated list, send a message to MAJORDOMO@CLOUD9.NET
 containing the phrase SUBSCRIBE AOL-SUX in the message body. To unsubscribe
 send a message saying UNSUBSCRIBE AOL-SUX to the same address.