According to sources close to the development, the company which has around 1,000 employees in India, will be outsourcing the engineering services that it operated in India and will reduce the headcount by 50 per cent.

"AOL will, however, retain those people who are involved in servicing the Japanese operations from India, running of mobile service Coolage and in the marketing team," a source said.

When contacted an AOL India spokesperson said: "Moving forward, our focus in India will be on our core capabilities around building the most compelling consumer facing products primarily for the Indian and other Asian markets." "We'll be partnering with Mindtree and HP to round out our business operations."

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