New evidence has emerged that Razorfish, the digital agency which Publicis acquired from Microsoft for $530m, was not be quite the snip it appeared at first sight.
In an earlier post, I expressed surprise at WPP’s reluctance to test Publicis’ resilience in the last round of bidding and suggested there may have been anxiety about Razorfish’s underlying performance.
I am not alone in this suspicion. Microsoft has just released more detailed figures on Razorfish financials and analysts at Citi have been quick to point out that they do not tally with the sunny, upbeat, picture portrayed by Publicis at the time of the acquisition in August. Specifically, revenue has been declining throughout the year, where Publicis said it had improved year on year; and the agency is set to make a loss of $50m, where Publicis claimed it would make a 6-8% margin. Citi cites potentially extenuating circumstances for the discrepancy, the more important being incentives for senior Razorfish executives which Publicis may have failed to count in. “While this doesn’t derail our positive assessment of the deal, it is strange,” concludes the Citi circular. Strange indeed. Particularly, one assumes, for Publicis shareholders.