The layoffs mark the latest setback for Netscape, which competes with Microsoft for browser market share. Microsoft's Internet Explorer is currently used by more than 90 percent of Web surfers, according to site visitor statistics published by Google.
The move affects fewer than 10 percent of Netscape employees, according to an AOL spokesman, who added that the company plans to continue to support current versions of the Netscape browser and the Netscape Web portal.
Netscape suffered its latest blow when its parent company AOL in an agreement with Microsoft said it would offer Internet Explorer as the default browser to subscribers of its proprietary online service for the next seven years.
The layoffs also come as the loose Mozilla.org group, which had overseen the open-source development efforts of the Mozilla browser, transforms itself into a nonprofit foundation. The foundation is funded in large part by a $2 million donation from AOL and $300,000 from Lotus founder Mitch Kapor.
Mitchell Baker, who will be president of the new Mozilla Foundation, said the group would use part of its seed funding to hire "a core group of people," which would include project managers and "key technical contributors" to the open-source project. Some of those people are expected to come from Netscape's ranks.
A broad group of independent volunteers and staffers at other companies are expected to continue working on the open-source browser effort.
Red Hat and Sun Microsystems will however continue to support the Mozilla project, which could help their own push toward the use of open-source software as a replacement for Microsoft products.
AOL's purchase of Netscape, when announced in November 1998, was valued at about $4.2 billion. By the time shareholders approved the deal the following March, a run-up in the price of AOL stock had inflated it to nearly $9 billion.