According to reports, Microsoft  has hired Morgan Stanley to sell its digital agency, Razorfish,  and  French marketing company, Publicis Groupe SA could be a possible contender.

The agency had been acquired by  Microsoft as part aQuantive for which it paid $6 billion in 2007.

Analysts have valued Razorfish at $600 million to $700 million, based on sales of about $400 million last year and profit margins for similar businesses of 12 to 13 per cent, according to reports. 

Razorfish is one of the largest interactive advertising and marketing agencies with a clientèle including McDonald's Corp, Starwood Hotels & Resorts and Carnival Cruise Lines.

Microsoft and Publicis are no strangers since just last week, VivaKi, the digital arm of Publicis Groupe and Microsoftt said that they would collaborate to drive the level of marketing performance, build increasingly engaging content for consumers and help better define audiences by using Microsoft technology for advertising on television set-top boxes.

Seattle-based Razorfish, is one of the largest digital agencies, with more than 2,000 employees.

According to Maurice Lévy, Publicis chief executive, funds from refinancing could could be available for acquisitions in emerging markets that are doing better than traditional advertising in Europe and US.

Industry sources point to  a conflict of interest with Microsoft Advertising which sells technology to rival digital agencies as a possible reason for the move. In August, the aQuantive deal completes two years which will open up favourable tax implications for Microsoft to sell off the asset, they say.

Meanwhile Lévy has said the the company would be willing to look at everything. Analysts say Razorfish would surely figure in the list Publicis would be interested. Other agency groups that would be interested in Razorfish include Omnicom and WPP which are facing similar pressures on marketing budgets that are driving them toward digital media they add.

Publicis Groupe is the world's fourth largest communications group and ranks as the world's second largest media agency with a global leadership in digital and healthcare communications. Its activities span 104 countries on five continents; the group employs around 45,000 professionals.

Its clients include Orange, Pernod Ricard, Qantas, Renault, Toyota, Nestle, Siemens, UBS, Whirlpool, Coca Cola, Citigroup, LVMH and Zurich Financial.

This year, the group has already made two acquisitions. It acquired privately held Kekst and Company, a strategic and financial public relations firm based in New York and Chicago-based Performics Search Marketing Business from Internet giant Google.

As on 31 March 2009, the company had a net debt of €1,097 million and its consolidated revenue was €1,075 million for the first quarter of 2009, up 1.3 per cent from a year earlier.

Razorfish Inc was formerly known as  Avenue A | Razorfish, and is one of the largest interactive agencies in the world. The company provides services across a wider range of areas including digital advertising and content creation,  media buying, strategic counsel and analytics.

Though owned by Microsoft, it  operates as an independent company.  With offices in New York, Chicago, Seattle, San Francisco, Philadelphia, Portland, Boston,  Razorfish has more than 2,000 employees worldwide.

Razorfish was established in New York in 1995 offering "Solutions to Hard Problems" in its motto. The company was one of the first companies to feature an animated homepage driven by the 'server-push' capabilities of the latest version of the Netscape browser.

Coupled with this and aggressive marketing tactics, the start-up quickly acquired a reputation for excellence which saw the firm grow quickly over the next few years.