Publicis Explains $20M Discrepancy in Razorfish Acquisition

(MoneyWatch)  Publicis has offered an explanation for why it said Razorfish was profitable on revenues of $380 million when Microsoft later produced numbers showing it was making a loss on revenues of $360 million. The discrepency comes from accounting differences between Publicis and Microsoft, Publicis' investor relations unit tells BNET. Here's their email:

A couple of points to answer your question about the discrepancy your are mentioning:

1/Revenue: intercompany sales for 22 m$

2/ 50 million operating loss: 80% of this loss comes from intangibles amortization related to the AQuantive acquisition by Microsoft. The loss also includes acquisition costs of foreign subsidiaries and restructuring charges in their fiscal year (2009, at June 30).

None of these items will hit Razorfish margins in the future.

Here's my translation: On revenue, Microsoft was not counting $22 million in work RF was doing for other parts of Microsoft. Assuming RF keeps those businesses, that $22 million will be billed and recognized. On the operating loss, Microsoft's costs for acquiring RF and other agencies will no longer appear in the RF income statement. (Publicis: If I've got this wrong, let me know!)

Of course, before RF becomes profitable at Publicis it must first earn back to the $530 million Publicis paid to get it.

The note solves a mystery that analysts at Citi called "strange" at the time of the deal.

• Previously:
• One Possible Reason Why Publicis Won't Honor Razorfish Stock Options
• Publicis Numbers on Razorfish Acquisition Don't Add Up
• Recovery Ahead? Publicis, Omnicom Are Positive While WPP, IPG Stay Cautious
• Publicis Plays Catch-Up With Unilever Mag Acquisition; Operating Leverage is Key
• After Publicis' Acquisition of Razorfish, Might ValueClick Be Next?
• Publicis Boss Levy Admits 1,800 Were Laid Off
• Publicis Q2: We're Shocked - Shocked! - to Find There's a Recession Going On!