AOL chairman and Chief Executive Officer Tim Armstrong speaks at the Reuters Global Media Summit in New York
AOL chairman and Chief Executive Officer Tim Armstrong speaks at the Reuters Global Media Summit in New York November 28, 2011. REUTERS/Brendan McDermid (UNITED STATES - Tags: MEDIA BUSINESS) - RTR2ULGG Photograph by Brendan McDermid — Reuters

Verizon’s AOL Unit to Lay Off 5% of Employees, CEO Says

Nov 17, 2016

Verizon's AOL unit will lay off about 500 employees, or 5% of its workforce, on Thursday, CEO Tim Armstrong said.

Armstrong, who ran the online media company before Verizon bought it for $4.4 billion last year, told the web site Recode that the cuts will allow him to devote more resources to mobile, video and data offerings.

“The layoffs are related to a 2017 strategy where we will add to our business,” Armstrong told Recode. “These are super targeted by area and we will be re-growing especially in video and mobile.”

A spokeswoman for Verizon confirmed the layoffs, which "are impacting a small percentage of our global workforce," she told Fortune.

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So far this year, Verizon (vz) has added 1,500 employees to AOL through the purchase of mobile ad marketplace Millennial Media and a separate ad deal with Microsoft (msft).

Thousands more employees will come aboard if Verizon completes its pending $4.8 billion Yahoo (yhoo) acquisition. But that deal has been thrown into question by a massive hacking incident disclosed in September. Verizon has given mixed signals about how it will proceed, possibly seeking to lower the acquisition price or scrap the deal altogether.

Verizon has said it is pleased with the performance of AOL. The Internet content unit brought in $486 million in net revenue last quarter, up 10% from the year-earlier period. But Verizon warned on its third-quarter financial call with analysts that AOL's revenue will actually be lower than last year for the next six months.

The AOL and Yahoo acquisitions are part of Verizon's effort to diversify its revenue base and find new areas of growth as its core wired and wireless telecommunications businesses slow. But the company has a long way to go—AOL's $486 million in revenue constituted less than 2% of Verizon's total revenue in the third quarter.

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