Microsoft's Razorfish cuts NYC staff

Microsoft's online ad agency Razorfish laid off 40 staff in its New York office this afternoon, citing a dropoff in business from the financial services sector.

"Many companies, especially those in the financial services sector, have been hit hard by the economic crisis. This has had a direct impact on our business, particularly in New York," Razorfish spokeswoman Sally O'Dowd said. "As a result Razorfish had to lay off about 40 people today, about two percent of our work force."

O'Dowd added: "At the same time we remain optomistic knowing we will weather this storm and maintain the integrity of our business. We are fortunate to have strong relationships with clients who believe in the power of digital to build their brands."

O'Dowd said no other offices were affected, but declined to comment further.

Microsoft acquired Razorfish when it bought the agency's parent company, aQuantive, for $6 billion, last year. The aQuantive purchase was part of Microsoft's effort to catch up to Google in online ad technology. Google at the time had just acquired another online ad company, DoubleClick.

There's been frequent speculation that Microsoft is looking to unload Razorfish. The thinking goes that Microsoft was never very interested in the ad agency, but wanted aQuantive for its major technology parts, the online advertising platform Atlas and website ad network DRIVEpm.

At the time of the Microsoft purchase, the ad agency was called Avenue A/Razorfish, but it recently rebranded itself Razorfish.

UPDATE: A day after cutting staff from its New York office, Razorfish announced it's expanding its presence in Europe.

The agency is  buying Wysiwyg, described as one of Spain's largest digital advertising agencies. Razorfish said the acquisition would help expand its presence in Europe, where it already has operations in the U.K., France and Germany.