America Online 2010 Annual Report Download - page 45

Table of Contents
AOL INC.
PART II—ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
million gain. The $5.4 million of sales proceeds continues to be deferred and will be recognized when the obligation is fulfilled at the end of the extended
service period.
During the second and third quarters of 2010, we concluded that ICQ met the requirements for presentation as discontinued operations. However, given
the probable extension and modification of the services we are providing to ICQ, we have subsequently concluded that the ICQ operations for the period prior
to the sale, no longer meet the criteria for presentation as discontinued operations. As a result, we have recast the assets and liabilities of ICQ as of
December 31, 2009 from assets and liabilities of discontinued operations to their natural classifications within the accompanying 2009 consolidated balance
sheet. Results of discontinued operations and cash flows for the years ended December 31, 2009 and 2008 were not impacted by the recast, as ICQ was never
presented as a part of discontinued operations for those historical periods. The results of operations of ICQ, excluding the related income tax benefit, were not
material to the Company's consolidated financial statements.
Revenue related to ICQ was $17.9 million, $39.1 million and $40.8 million for the years ended December 31, 2010, 2009 and 2008, respectively.
Operating income related to ICQ was $10.1 million, $24.5 million and $25.3 million for the years ended December 31, 2010, 2009 and 2008, respectively.
Restructuring Actions
We completed a significant restructuring initiative in the fourth quarter of 2010, which began late in 2009. We reduced our total workforce by nearly
one-third in connection with this restructuring initiative, prior to hiring new employees in areas of strategic focus. As part of this initiative, we reduced our
cost base in the United Kingdom and ceased or reduced operations in a number of other countries including France and Germany. We are continuing to
operate certain French and German web properties and sell display advertising, leveraging our centralized European infrastructure and we recently acquired
goviral to expand our video advertising capabilities in Europe. However, we expect advertising revenues generated in those countries to continue to decline in
the near term. In connection with this restructuring initiative, we incurred $33.8 million of restructuring expense during the year ended December 31, 2010.
We do not expect to incur significant additional expenses related to this initiative in 2011. As a result of this restructuring initiative, our operating expenses
were lower in 2010 and we expect them to continue to be lower, at least in the near term, due primarily to lower headcount and fewer facilities in which we
conduct operations. We estimate that the restructuring initiative will result in a reduction to annual compensation expense and facility operating expenses as
compared to 2009 levels of approximately $230 million in total. However, this estimate does not include the impacts of other changes to our business such as
reductions in TAC and estimated increased costs related to the employees hired in areas of strategic focus.
In connection with our acquisition of TheHuffingtonPost.com, we currently expect to incur cash restructuring charges of approximately $30 million, of
which $10 million represents cash consideration that will be reflected as a restructuring charge immediately following the acquisition. As we continue to
refine and optimize our assets and operations, we may identify additional restructuring actions separate and apart from the restructuring initiative which began
in late 2009 and the restructuring charges associated with the acquisition of The Huffington Post. If additional restructuring actions are identified, we would
incur additional restructuring costs.
Key Metrics
Audience Metrics
We utilize unique visitor numbers to evaluate the performance of AOL Properties as well as AOL Media, a subset of AOL Properties that excludes
Mail, Instant Messaging, Search, Ventures and Local. In addition, we
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