AOL, the internet arm of Time Warner, plans to cut 5,000 jobs, about a quarter of its staff, over the next six months as it tries to boost profit.
AOL is having to revamp and renegotiate its internet products
The company is facing stiff competition and earlier this week said on Wednesday that it would no longer charge users for faster, broadband internet access.
Many of the job cuts will be European as AOL plans to sell off its UK, French and German internet access businesses.
The European divisions currently employ about 3,000 staff.
According to reports and market speculation, AOL already is in talks with a number of bidders in the UK, France and Germany.
Among the firms that are seen as potential buyers for the UK business are BSkyB, Carphone Warehouse and France Telecom's Orange mobile phone division, the Reuters news agency reported.
France's Neuf Cegetel is said to be interested in that country's local business, while firms keen to buy AOL's German operations include Versatel, Freenet.de, Telecom Italia and Dutch phone firm KPN, the news agency said.
There also are expected to be job losses in the US when AOL stops marketing its slower, dial-up phone services.
Earlier this year, AOL said it would sack 1,300 of its US call centre staff because, it said, customers are now better equipped to help themselves
AOL is expected to announce more details of the job cuts in October.
Time Warner, AOL's owner, said it expected the job cuts to cost it $250m (£132m), with about half of that cash going on payments to outgoing staff.
AOL chief executive Jonathan Miller made the announcement via a webcast on Thursday.
A company spokeswoman said that AOL had decided to focus on growing its audience and on growing the advertising part of its business.