America Online (search), the world's largest Internet service provider, plans to lay off more than 700 employees early next month, or 5 percent of its U.S. work force, to cut costs and meet financial goals, a source close to the company said on Tuesday.

AOL, a unit of media conglomerate Time Warner Inc. (TWX), has lost millions of subscribers to lower-cost rivals and higher-speed cable and telephone Internet services over the past few years.

In order to meet double-digit profit growth goals, AOL has trimmed its network costs over the past two years in the face of no revenue growth.

The source said most of the job cuts would be made at AOL's Dulles, Va., headquarters.

About 5,000 of AOL's 13,000 U.S. employees are based at Dulles. AOL cut 850 jobs in 2003.

The source said AOL is still evaluating which business units and projects may be eliminated as part of the pruning process.

The company had no official comment on the matter. The planned job cuts were first reported in The Washington Post,

As of the second quarter, AOL's U.S. subscriber base was 23.4 million, down 2 million from a year earlier and down 668,000 from the first quarter of 2004.

Time Warner is to announce third-quarter earnings on Wednesday. The company is likely to face questions from Wall Street analysts about AOL's financial performance and the division's efforts to reduce spending.

A rebound in online advertising in the second quarter is believed to have been sustained in the third quarter, helping to offset the loss of revenue from AOL subscriber defections.

Time Warner shares slipped 26 cents, or 1.56 percent, down from a Monday close of $16.38 on the New York Stock Exchange (search).