Microsoft sheds 2,000-employee ad agency in $530 million deal

Microsoft sheds 2,000-employee ad agency in $530 million deal

Summary: The rumors of the past few weeks were true: Microsoft has sold Razorfish -- the digital ad agency it purchased when it bought its parent company aQuantive in 2007 -- to Publicis Groupe for $530 million. For those keeping track of employee-headcount totals at home, that means Microsoft is shedding 2,000 or so Razorfish employees as part of the sale.

SHARE:
8

The rumors of the past few weeks were true: Microsoft has sold Razorfish -- the digital ad agency it purchased when it bought its parent company aQuantive in 2007 -- to Publicis Groupe for $530 million.

For those keeping track of employee-headcount totals at home, that means Microsoft is shedding 2,000 or so Razorfish employees as part of the sale. Given that the Redmondians are poised to add 400+ Yahoos to the Microsoft employee roster if and when the Microsoft-Yahoo search partnership passes government approval, Microsoft's Online Systems business may end up losing a lot more employees in fiscal 2010 than it looked like a week ago. (And that's a good thing, if you are a Microsoft shareholder, since Wall Street is continuing to push Microsoft to trim away at its headcount.)

Among the terms of the Razorfish acquisition, which the pair is expecting to close in the fourth calendar quarter of 2009, Publicis Groupe clients will be allowed "to purchase display and search advertising from Microsoft over the five-year term of the (strategic partnership) agreement on favorable terms, in exchange for certain minimum guaranteed aggregate purchase levels." Razorfish also will continue to be a "preferred provider" of online ads and marketing for Microsoft itself; Microsoft has committed to spend some unnamed minimum sum for those services during the same five-year period.

Microsoft is keeping the rest of aQuantive, a vendor of online advertising platforms and tools, which it bought for $6 billion. aQuantive bought Razorfish in 2004 for $160 million.

In other search-related news, was I the only one who found a note in Yahoo's latest 10-Q (filed August 7) somewhat ironic and interesting?

In the risk factors section, Yahoo management mentioned the possibility of "new technologies (that) could block our advertisements or our search marketing listings" as something worthy of note. One such technology cited by the company: "proprietary document formats, such as Microsoft Word."

From the 10-Q:

"Proprietary document formats may limit the effectiveness of our search technology by preventing our technology from accessing the content of documents in such formats, which could limit the effectiveness of our products and services.

"A large amount of information on the Internet is provided in proprietary document formats such as Microsoft Word. These proprietary document formats may limit the effectiveness of our search technology by preventing our technology from accessing the content of such documents. The providers of the software applications used to create these documents could engineer the document format to prevent or interfere with our ability to access the document contents with our search technology. This would mean that the document contents would not be included in our search results even if the contents were directly relevant to a search. The software providers may also seek to require us to pay them royalties in exchange for giving us the ability to search documents in their format. If a software provider also competes with us, it may give its search technologies, or the technologies of our competitors, a preferential ability to search documents in its proprietary format. Any of these results could harm our brand and our operating results."

Just one more example of the joys of co-opetition... and possibly something the industry's newest BFFs (CEOs Steve Ballmer and Carol Bartz) might have to work out as their partnership moves forward.

Topics: Browser, Banking, Microsoft

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

8 comments
Log in or register to join the discussion
  • I think they mention Word just as an example

    I wouldn't cite Word as a propietary format that doesn't allow being searched - My take is that, even though it is propietary, it is well known and can be read by 3rd parties... The issue seems that in the future programs like Word (but not necessarily Word per se) may have obscure formats. On the other hand, if I password protect a document, that means I don't want it to be searched...
    Roque Mocan
  • I already block out many advertisers on our company firewall

    I also do it at home with firefox ad blocker, flash blocker and javscript blocker.

    Works well.
    Been_Done_Before
  • That's not really 'shedding' employees in the normal sense of the term.

    Yes, they did jettison 2000 employees - but they did it by selling off an acquired company (or a division of it). That means they didn't fire or lay anyone off - that'll be up to Publicis Groupe to deal with.

    It's a bit disingenuous to frame it as 'dumping employees' when it's really 'dumping an acquisition'. It would be like claiming "Microsoft gets into the plumbing and fixtures sales business" when they sold a building. True, but not really an accurate description.
    TheWerewolf
  • MIcrosoft has (so far) cut 7000 of the payroll this year.

    This should make the operations a bit more lean and they can focus on their core business(es). With the 5000 laid off (so far this year) and 2000 more off the books, this will allow for more efficiencies and lower operating cost. This should make the investors happy!
    B.O.F.H.
    • actually, MS has cut fewer than 5K so far

      Hi. MS anncd in January plans to cut 5,000. Before this, they had cut roughly 3K or so (based on various numbers I've seen). They said they'd be moving more folks into the Online Systems Division during this period. So yes, it's hard to keep track of how many have been cut so far, but it's still under 5K, I believe.... Thanks, MJ
      Mary Jo Foley
      • Current layoff count is 4400, staff going down by 6400.

        The plan (as posted) is to cut 5000, so far (Round 1, January 22) was 1400, round 2 (notices reportedly went out in early May) was 3000. There is a claim that they will create 2000 to 3000 new jobs, but time will tell.

        This reduces the Microsoft head count by 2000 more (but is not a layoff).

        Staffing reduction so far: 6400 positions.
        B.O.F.H.
        • I think it's lower than that

          Here's what the Q4 earnings release said:

          "In January 2009, we announced and implemented a resource management program to reduce discretionary operating expenses, employee headcount, and capital expenditures. As part of this program, we are eliminating up to 5,000 positions in research and development, marketing, sales, finance, legal, human resources, and information technology by June 30, 2010. During the three and twelve months ended June 30, 2009, we recorded employee severance charges of $40 million and $330 million, respectively, for the expected reduction in headcount."


          Here's the link: http://www.microsoft.com/msft/earnings/FY09/earn_rel_q4_09.mspx

          MJ
          Mary Jo Foley
          • I have multiple sources on this (now).

            <a href=http://news.cnet.com/8301-13860_3-10233569-56.html>Microsoft sends second wave of layoff notices to 3,000</a>, May 5, 2009

            <i>Microsoft on Tuesday notified more than 3,000 workers that it was eliminating their jobs.

            The software maker said in January that it would cut up to 5,000 jobs over the next 18 months. It made 1,400 cuts at the time. With the second wave of notifications on Tuesday, Microsoft has cut nearly all 5,000 jobs already.</i>

            That brings the body count to 4,400 (with rough dates).

            Another source: <a href=http://blogs.computerworld.com/microsoft_layoffs_round_3_000>Microsoft layoffs, round two... 3,000 heads roll</a>, May 6, 2009

            <a href=http://seattletimes.nwsource.com/html/microsoft/2009180671_microsoft06.html>Latest round of Microsoft layoffs may not be last</a>, The Seattle Times, May 6, 2009

            <i>With Tuesday's second round of layoffs, which included 1,200 locally, Microsoft has made almost all of the planned 5,000 job cuts announced in January.</i>

            ...

            <i>In an e-mail to all employees Tuesday, CEO Steve Ballmer left open the possibility of more layoffs.

            "As we move forward, we will continue to closely monitor the impact of the economic downturn on the company and, if necessary, take further actions on our cost structure including additional job eliminations," he said.</i>

            Do you have a better source than those listed? These are tough economic times.

            Your own blog indicates another reduction of 2000 people (through spin-off). Running total: 6,400
            B.O.F.H.