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Microsoft (MSFT)
Microsoft Seeking to Unload Razorfish
Every company fits into some sort of category. Some companies are fast-thinking, innovative, or determined. Some make wise decisions while others are considered incompetent based on consecutive poor decisions. Imitation runs rampant among companies, but sometimes it can lead a company down the wrong path. This appears to be the case with Microsoft. Reports surfaced today suggesting that Microsoft is trying to unload its advertising agency Razorfish. Microsoft has only owned Razorfish for less than two years, so why is the company looking to sell the business so soon? What possessed the company to purchase the ad agency in the first place?
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The highly-competitive search engine market has propelled Microsoft and Google (GOOG: Charts, News, Offers) into an ongoing war to outdo one another. This simple fact may be one of the reasons that Microsoft held onto Razorfish for as long as it did. Another reason may be the fact that Microsoft was not really seeking to own an ad agency. In 2007, Microsoft was focused on bolstering its ad network. The company believed that it found the necessary means to do this when it purchased aQuantive. Unfortunately, for Microsoft, the $6 billion purchase included the Avenue A/ Razorfish agency. Microsoft chose to roll with the punches and hold onto the agency possibly because Google still had DoubleClick/Performics. Microsoft and Google both came under fire as many suggested that the two companies owning ad agency was definitely a conflict of interest.
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Google wised up and moved quickly to divest itself from Performics. Owning Performics put Google in the uncomfortable position of providing search engine marketing and search engine optimization services. Because of this, Google acquired a list of competitors that it chose not to have. Google announced last year that it had decided to sell the unit to advertising firm Publicis. Microsoft is bumping up against similar issues with Razorfish, so the decision to sell the unit is probably the right one for the company. Although Microsoft has retained Morgan Stanley to search for buyers, the company may not have to search far. Publicis has been named as one of the primary interested parties. Razorfish was originally valued at $800 million, but during these tough economic times Microsoft may be forced to settle for less.
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Microsoft hasn't issued any comments about this divestiture as of yet. Investors and critics are anxiously awaiting word from Microsoft regarding this proposed decision. Hopefully Microsoft has learned to sell off businesses that they are not currently interested in pursuing or that pose some conflict of interest with their current business. Shares of Microsoft advanced during early morning trading.
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