Microsoft joins select industrial club with S&P's AAA rating
Tuesday, 23 September 2008, 19:33 IST
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Chennai: At a time when big American financial corporations are falling like nine pins, software giant Microsoft Corporation joined five other non-financial corporate debt issuers in the US to be assigned a AAA rating by Standard and Poor's Rating Services (S&P). The global credit rating agency Monday said it assigned its 'AAA' corporate credit rating and 'A-1+' short-term and commercial paper ratings to Microsoft with the outlook rated as 'stable". "The ratings on Microsoft reflect the company's excellent operating performance and financial profile," said S&P's credit analyst Philip Schrank. The company maintains a vertically integrated and diverse product portfolio with numerous leadership positions, a broad geographic footprint, and minimal financial risk. "While we view the high-tech industry as possessing higher-than-average business risk, we regard software companies more favourably due to the recurring nature of the business, significant barriers to entry, and strong cash flow generation," added Schrank. With fiscal 2008 revenues exceeding $60 billion, Microsoft is almost thrice the size of the next largest software provider. The company's competitive position is further supported by a track record of above-industry revenue growth (averaging in excess of 15 per cent over the past three years), geographic diversity (55 per cent international), broad distribution relationships and very strong brand recognition. According to S&P this is also the first new AAA to an industrial company in the last 10 years after Automatic Data Processing Inc in 1998. The six AAA rated industrial companies are Automatic Data Processing, Exxon Mobil Corporation, General Electric, Johnson & Johnson, Pfizer Inc and Microsoft. In the early 1980s, there were more than 30 industrial companies with 'AAA' ratings. However, major changes in the business environment, globalisation, and emerging technologies took their toll on many of these credits. For US non-financial corporates, more than 70 per cent of S&P ratings are currently below investment grade, compared with 32 per cent in 1980.
Source: IANS
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