TECHNOLOGY

SOURCE: AOL TO CUT 700 JOBS

America Online, which has been trying to turn its fortunes around as users leave the service for broadband connections, plans to cut about 700 jobs next month, or 5% of its American work force, in a bid to meet financial targets, a person familiar with the matter said yesterday. The source, who spoke on condition of anonymity, said the job cuts would occur mainly in northern Virginia, where the online service is based. News of the cuts was reported earlier in The Washington Post. Jim Whitney, an AOL spokesman, declined to comment. Word of the job cuts came one day before AOL’s parent company, Time Warner Inc., reports earnings for its third quarter. AOL is expected to be a key topic for investors, including its efforts to seek new kinds of revenues as its dial-up users migrate to high-speed Internet connections. AOL employs about 13,000 people in America and 20,000 worldwide. It had 23.4 million subscribers as of the end of June. Last year the company cut 450 jobs in California as it consolidated its software development operations there.

– Associated Press

STATE

MOODY’S GIVES NEGATIVE RATING TO N.Y. COUNTIES

Rising Medicaid and health care costs contributed to an overall negative credit outlook for New York state counties from Moody’s Investors Service. The Wall Street rating agency said Tuesday that while many counties made progress toward balancing their budgets last year, they still face rising costs from Medicaid, employee wages, health benefits, and pension contributions. The cost increases come as options for raising revenues are limited, according the Moody’s. “Although most New York counties enjoy significant legal ability to raise property taxes, political ability may be more limited,” said report author Robyn Kapiloff. Mr. Kapiloff said Medicaid costs have grown an average of 15% annually for most counties as a result of expanded eligibility and prescription drug cost hikes. New York is one of only a few states in the nation that mandate local counties to share some of the cost for Medicaid, the government health insurance program for poor people. County officials have been lobbying Albany to change the current system. Moody’s rates 53 New York counties with about $8.2 billion in outstanding principal. Moody’s has downgraded five counties and assigned seven negative outlooks during the last year. Two counties have been upgraded: Essex and Nassau.

– Associated Press

EXECUTIVES

PARAMOUNT PICTURES’ LANSING WILL RESIGN AS CHAIRWOMAN

Sherry Lansing, chairwoman of Viacom Inc.’s Paramount Pictures film studio since 1992, will leave the unit when her contract expires at the end of 2005, the company said. During her tenure, she developed films such as “Forrest Gump” and “Fatal Attraction.” Ms. Lansing’s departure follows the resignation in June of Jonathan Dolgen, chairman of Viacom’s entertainment group, which includes the film studio. The unit, whose film releases this year include “Sky Captain and the World of Tomorrow” and “The Manchurian Candidate,” on October 28 reported a 1% drop in third-quarter sales. Shares of Viacom rose 39 cents to $37.12 in composite New York Stock Exchange trading. They have fallen 18% this year.

– Bloomberg News

IN THE COURTS

BEAR STEARNS KNEW ABOUT WORLDCOM FINANCES, E-MAILS SHOW

Bear Stearns Inc. publicly praised WorldCom Inc. stock while its analysts and investment bankers exchanged e-mails about negative aspects of the company’s finances, court papers filed in an investors’ lawsuit show.

The e-mails were attached to a request by investor lawyer Michael Rediker that Bear Stearns be barred from saying a “Chinese wall” existed between its promotion oriented sales side and its analysts. The e-mails show the bank knew WorldCom was in financial trouble while it simultaneously sold bonds to finance a WorldCom merger with Intermedia Communications Inc., Mr. Rediker said in court papers.

“The standalone margins at WorldCom are very deceptive,” research analyst William Deatherage wrote to Bear Stearns investment bankers, including managing director Gerald Dorros, in an e-mail submitted to the court hearing the suit in Montgomery, Ala. “The company is very cash flow negative.”

– Bloomberg News