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Microsoft Sells Its Digital Ad Agency For $530MSoftware giant Microsoft Corporation (NASDAQ:MSFT), has agreed to sell its interactive ad agency Razorfish to French marketing group Publicis Groupe SA for $530 million in cash and stock.

The agreement (.pdf) was announced on Sunday afternoon in Paris, France, where Publicis, one of the world’s largest advertising companies, is based. The French company, which beat WPP of Britain and Dentsu of Japan in the final bidding for the Microsoft unit, will pay the Redmond, Wa-based Microsoft a combination of cash and 6.5 million shares of Publicis stock.

“The purchase of Razorfish is a new step in our strategic plan to be the unquestionable leader in digital communication,” Publicis Groupe Chief Executive Officer Maurice Levy said in the statement. Levy added that when the acquisition is completed, about 25% of the company’s annual revenue will be generated from digital communications, up from around 21% currently.

Both companies also signed a five-year strategic alliance agreement that will allow Publicis to purchase hundreds of millions of dollars in advertising over several years across Microsoft’s digital properties, including its newly launched search engine, Bing. This certainly provides a nice ad boost to the Microsoft-Yahoo (NASDAQ:YHOO) search deal announced last month.

Microsoft Chief Executive Steve Ballmer said in a statement,

We are grateful for the contributions Razorfish has made to our online advertising business…and are pleased that they have found a new long-term home with Publicis Groupe.

Microsoft acquired Seattle-based Razorfish, founded in 1995 and formerly called Avenue A Razorfish, as part of its $6 billion takeover of aQuantive in May 18, 2007. The acquisition at the time was considered very important as a way to give Microsoft a new presence in the ad services business.

After the deal closes, which is expected in the fourth quarter, Razorfish will be operated under its current management headed by Chief Executive Bob Lord as an autonomous unit of the VivaKi group of Publicis.

Under the terms of the agreement, Razorfish, which was credited with designing the logo for Microsoft’s new search engine Bing, will continue to be a preferred provider to Microsoft for digital strategy.

Source: Microsoft Sells Its Interactive Ad Agency