Microsoft pares down by selling Razorfish ad agency

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Microsoft is offloading interactive advertising agency, Razorfish, in a move that could pave the way for the software giant to dispense with other units.

The company announced on Sunday that it was selling its 14-year-old agency to the French advertising conglomerate Publicis Groupe, in a cash-and-shares deal worth $530m (£317m). The news came just months after the two companies agreed to cooperate to create new hi-tech TV advertising systems.

Publicis, which owns agencies including Saatchi & Saatchi and Leo Burnett, will add the company to its roster and inherit a list of high-profile clients including Ford and McDonald's.

"The acquisition of Razorfish is another step forward in realizing our strategic vision of building a world leader in digital communications, a critically important space for our clients," said Maurice Levy, the chairman and chief executive of Publicis.

Speculation had been rife about the future of the agency, which became part of Microsoft in 2007, when the American software giant bought its parent company, aQuantive for $6bn.

But the deal will also stoke speculation that Microsoft could be preparing to divest itself of other parts of its business that it no longer considers core. Among the prime candidates is Massive, the in-game advertising company it bought for around $200m in 2006.

After a difficult year in which Microsoft laid off thousands of staff members and saw a decline in growth - the first in its history - the Seattle company appears keen to sell off some of the assets it has acquired in recent years.

Such deals will also help ease a little of the concern from investors over the recent deal to take over some of Yahoo's search business, with clear indications that the company is attempting to focus its activities more on businesses like search and software.

Under terms of the agreement with Publicis, Razorfish will continue to be a preferred provider to Microsoft for digital strategy, creative and marketing services and Microsoft has committed to spend a minimum amount for those services each year.

Razorfish will continue to operate under its brand name and be part of VivaKi, the new Publicis Groupe entity created in June 2008 to reflect independent operations of Digitas, Starcom MediaVest Group, Denuo and ZenithOptimedia. Razorfish's management team, led by chief executive Officer Bob Lord, will remain unchanged. link.....