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CompuServe Restructures, Lays Off 500; AOL Hikes Price

CompuServe Interactive, a wholly owned subsidiary of America Online, reported today it is reorganizing operations and laying off 500 employees in efforts to become more profitable.

In conjunction with the CompuServe reorganization, AOL announced its own changes in management and service.

The CompuServe reorganization comes after a review of how the company will best be able to utilize AOL's existing resources and infrastructure.

"Our revitalization program will enable us to take full advantage of AOL's scale, resources and experience to improve CompuServe and make it more competitive in the U.S. market," said Mayo S. Stuntz, Jr., president of CompuServe Interactive.

Among the changes to its operations, CompuServe stated it is suspending the "C" Web-based service, incorporating it into the next-generation release of its software, version 5.0, which will be developed in collaboration with AOL.

The company reports it will continue to operate as a separate service, one of three under the AOL brand, and that its headquarters will remain in Columbus, OH.

In addition to CompuServe, AOL will offer its services under two other brands: AOL Interactive Services and AOL Studios.

Robert W. Pittman, current President of AOL Networks, will become President and Chief Operating Officer of America Online, responsible for overseeing all three brands.

AOL also announced that Lennert J. Leader, the company's Chief Financial Officer, has been named President, AOL Investments, a division responsible for overseeing AOL's growing portfolio of investments in public and private companies, including The Motley Fool and iVillage.

In related news, AOL stated that as of April 1998, its service will be available to subscribers for $21.95 per month, an increase of $2.

"AOL members now spend on average more than 23 hours a month online compared with just 7 hours before unlimited use pricing was introduced. In the last year alone, Web hits by AOL members have quadrupled to 700 million daily, and the number of e-mail messages has more than tripled to 22 million each day," said Steve Case, chairman and chief executive officer of AOL.

"Each additional minute our members spend online adds to our cost of delivering unlimited use service. Revenues from advertising, commerce and other sources continue to grow as anticipated, but they are not yet able to cover the growth in member usage. The price increase will help cover these costs and fund continued investments in network access, customer support, programming and technological innovation," Case added.