S&P ASSIGNS TOP 'AAA' RATING TO MICROSOFT

New York
Financial Chronicle

Software giant Microsoft has been assigned the highest investment grade of 'AAA' by global credit rating agency Standard & Poor's, making it the first American non-financial corporate debt issuer to receive this rating in a decade.

"... Assigning a 'AAA' to Microsoft is a rare development in US credit history, and represents an unusual combination of qualities that are shared by few other companies.

"In addition to the size and scope of its operation, its dominant competitive position, and its strong growth capability, Microsoft has also maintained a level of financial conservatism that reflects very limited credit risk," S&P said on Monday.

The rating came after the software behemoth said it would buy back shares worth 40 billion dollar.

Currently, only five other US corporates -- Automatic Data Processing, Exxon Mobil, General Electric, Johnson & Johnson, Pfizer Inc -- carry a 'AAA' rating.

The last 'AAA' was assigned to Automatic Data Processing in October 1998.

However, S&P noted that Microsoft and the few other 'AAA' firms are likely to be part of an increasingly smaller group due to the expected ongoing trend toward reduced credit quality.

"Considering the move to higher-risk financial strategies by issuers, it's not likely that there will be any additional 'AAA's anytime soon," the rating agency pointed out.

According to S&P, there were more than 30 industrials companies with 'AAA' ratings in early 1980s but major changes in the business environment, globalisation, and emerging technologies affected the rating of many of them.

"Companies like General Motors, IBM, AT&T, and Eastman Kodak lost the highest rating because of challenges they faced in their business environments. However, many other 'AAA's were lost because of changes in financial policies fuelled by shareholder pressure," the rating agency said.