Nov. 19 (Bloomberg) -- AOL, the Internet unit being spun off from Time Warner Inc. in December, plans to cut about one- third of its workforce over the next several months.

AOL employs about 6,900 people, AOL spokeswoman Tricia Primrose said in an e-mail, indicating job cuts of about 2,300. The company will begin a voluntary layoff program Dec. 4 and is looking for as many as 2,500 volunteers, she said. AOL will begin firing employees if the voluntary departures fall short.

“They need to get leaner to enhance the stock,” Fred Moran, an analyst with Benchmark Co. in Boca Raton, Florida, said in a Bloomberg Radio interview. “They’ve had the opportunity to compete for the last decade and arguably they’ve failed.”

AOL is aiming to reduce its annual operating costs by about $300 million through the restructuring, the New York-based company said today in a regulatory filing. AOL, an online pioneer, is now combating a slump in advertising revenue that contributed to a 50 percent drop in operating income at the division in the third quarter.

Chief Executive Officer Tim Armstrong, 38, told employees in July that job cuts were possible. Armstrong, a former Google Inc. executive named CEO of AOL in March, plans to overhaul advertising and develop more local and niche Web sites to help turn around falling sales.

Job Cuts

AOL has gone through several rounds of firings since becoming a unit of Time Warner Inc., including a reduction of 20 percent, or 2,000 jobs, two years ago. Cutting one-third of the workforce will leave AOL with about 4,600 employees, down from about 18,000 in 2001 when the company bought Time Warner for $124 billion.

Time Warner fell 52 cents, or 1.6 percent, to $32.30 at 4:15 p.m. in New York Stock Exchange composite trading. The shares, which Benchmark’s Moran recommends holding, have increased 45 percent this year.

Time Warner this week said the planned spinoff of AOL to shareholders will take place Dec. 9, and AOL will begin trading as a separate company on Dec. 10. The separation will undo the 2001 merger that led to record losses the next year.

The Internet company is worth about $3.3 billion, based on Time Warner’s closing price yesterday and the terms of the spinoff, Moran said. Time Warner stockholders will receive one share of AOL common stock for every 11 shares they own, the company said this week.

Restructuring Charges

AOL expects to take as much as $200 million in restructuring charges in the first half of 2010 if the plan is approved by the new board after the spinoff, according to the filing.

Armstrong told employees today that he will not take a bonus this year, Primrose said. He said it is not indicative of future payouts for the overall employee bonus plan.

Armstrong’s three-year contract, ending in April 2012, provides a salary of $1 million a year and a cash bonus of as much as $4 million. His 2009 bonus was guaranteed to be at least $1.5 million.

To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net

Last Updated: November 19, 2009 17:00 EST