New York - AOL is to cut 700 jobs or 10 per cent of its workforce as the economic downturn reduces advertising income, the company announced Wednesday in an email to employees.

The company, which is part of media conglomerate Time Warner, will also reorganize into three main business groups focusing on advertising, social networks and media content, said the email, which was first reported by the Wall Street Journal. AOL will also not be granting pay raises this year to employees.

"Reducing our workforce is never easy, particularly in the current climate, but our goal in doing this is to provide our core businesses the resources they need to thrive," wrote AOL Chief Executive Randy Falco. "Please know that, as always, we'll be doing everything we can to help and support those affected, including offering severance packages and other services."

The cuts had been widely expected after Time Warner, the world's biggest media company, said this month that it will post a loss for 2008, its first in six years.

Other divisions of Time Warner have already announced job cuts including Warner Brothers' film and television unit which is eliminating or outsourcing 800 positions. Publishing division Time Inc. said in October it would cut 600 jobs, or 6 per cent of its workforce. (dpa)