Ratings agencies usually do not give a company a rating higher than its home country's sovereign rating. Are the tech giants then suffering the domino effect of the U.S. downgrade?

Five tech firms with market capitalization of at least $100 billion, namely, Microsoft Corp., Apple Inc., International Business Machines Corp., Google Inc., and Oracle Corp. are expected to continue to grow this year despite the unprecedented downgrade of the U.S. government's pristine credit rating and the ensuing global economic turmoil.

Standard & Poor's Ratings Services on Friday lowered its long-term sovereign credit rating on the United States of America to 'AA+', and gave a "negative" outlook on the rating. "When comparing the U.S. to sovereigns with 'AAA' long-term ratings that we view as relevant peers -- Canada, France, Germany, and the U.K. -- we also observe that the trajectory of the U.S.'s net public debt is diverging from the others," S&P said.

S&P announced Tuesday that the sovereign downgrade will not affect the ratings or stable rating outlooks on the six U.S.-domiciled highest-rated non-financial corporate issuers: Automatic Data Processing Inc. (ADP; AAA/Stable/A-1+), ExxonMobil Corp. (AAA/Stable/A-1+), Johnson & Johnson (AAA/Stable/A-1+), Microsoft Corp. (AAA/Stable/A-1+), General Electric Co. (AA+/Stable/A-1+), and W.W. Grainger Inc. (AA+/Stable/A-1+).

"Given the global and diverse business lines and significant financial strength of Exxon Mobil, Johnson & Johnson, Microsoft, and General Electric, the sovereign downgrade of the U.S. does not have an impact on our ratings and rating outlooks for these U.S. domiciled corporate issuers," S&P said. They enjoy 'excellent' business risk profiles, with end-market diversity, diversity of product and service lines, and a track record of solid profitability, along with "minimal" or "modest" financial risk, with significant cash flow from various businesses and substantial liquidity.

Note that Microsoft is the lone tech firm with a 'AAA' rating. And with the recent announcement, Microsoft will share the limelight with three other firms as the only four companies that have credit ratings higher than the United States'.

Credit Ratings

Standard & Poor's, a subsidiary of publisher McGraw-Hill Cos., rates borrowers on a scale from 'AAA' to 'D'.

Investment Grade:

'AAA' - Extremely strong capacity to meet financial commitments.

'AA' - Very strong capacity to meet financial commitments.

'A' - Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.

'BBB' - Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.

'BBB-' - Considered lowest investment grade by market participants.

Non-Investment Grade (also known as Junk):

'BB+' - Considered highest speculative grade by market participants.

'BB' - Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.

'B' - More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.

'CCC' - Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.

'CC' - Currently highly vulnerable.

'C' - Currently highly vulnerable obligations and other defined circumstances.

'D' - Payment default on financial commitments.

'R' - An obligor rated 'R' is under regulatory supervision owing to its financial condition.

'SD' - has selectively defaulted on some obligations 'NR' - not rated

According to Business Insider, in the early 1980s, 60 U.S. firms held the top rating. By 1995, only half as many were rated AAA. Behemoths like Berkshire Hathaway, GE and Pfizer all lost their AAA status during the depths of the latest financial crisis.

Microsoft

Microsoft joined the U.S. triple-A ratings club in 2008. At that time, Microsoft was almost three times the size of the next largest software provider, was the leading supplier of PC operating system (OS) software, and had above-industry revenue growth.

During the recent years, Microsoft has been facing a changing business environment, and new tech giants have emerged. Microsoft's OS has failed to gain any ground in the lucrative smartphone and tablet market; many Internet Explorer users have shifted to Google's Chrome and other browsers; Microsoft's Bing has failed to defeat the Google search engine; and some PC users have opted to use the free-of-charge open source OS instead of Microsoft Windows.

Still, the Bill Gates-founded company has continued to post double digit growth. For the fiscal year ended June 30, 2011, Microsoft reported record revenue of $69.94 billion, a 12% increase from the prior year. Net income was $23.15 billion, which represented a 23 percent increase from the previous year.

Microsoft continues to pile up cash from the sale of the Windows 7 OS, the Microsoft Office suite, and Xbox consoles, among others. The Redmond, Washington-based company had $52.8 billion in cash in its books as of June 30, 2011

"A strong year of double-digit increases in revenue and earnings is a real credit to all of our Microsoft employees and partners around the world. We continue to see strong business demand across all of our products, from small businesses all the way up to the largest global enterprises," said Kevin Turner, chief operating officer at Microsoft, last month. "Our move to cloud services continues with the release and momentum of Office 365 and growth in Windows Azure. We're providing our customers seamless and powerful ways to move to the cloud, and we are well positioned for the coming year."

Apple

Apple Inc., the creator of the iPhone, iPad tablets, iPod music players, iMac PCs, and iTunes music store, doesn't have credit ratings from S&P and the two other major ratings agencies. However, if it were rated by these agencies (in the unnecessary event that it borrows money), it would have the triple-A corporate credit ratings -- or "AAAA" if you ask CNNMoney's Philip Elmer-DeWitt.
Bloomberg has given Apple an 'AAA' quantitative issuer rating.

The Company posted record revenue of $28.57 billion and record net profit of $7.31 billion, or $7.79 per diluted share, for the third quarter ended June 25, 2011. These results compare to revenue of $15.70 billion and net quarterly profit of $3.25 billion, or $3.51 per diluted share, in the year-ago quarter.

Apple has had no debt outstanding. Its assets exceed liabilities by $69.3 billion as of June 25, 2011.

Apple as of June 25 had $76.2 billion in cash and marketable securities. At one point last month, Apple had more money in the bank than the U.S. federal government.

Forbes' Brian Caulfield, after Monday's stock crash, said that Apple's cash pile is enough to purchase, Bank of America, or Ford + General Motors, or Cisco, or Hewlett-Packard, or Disney or United Technologies.

According to Bloomberg News, Apple passed, albeit temporarily, Exxon Mobile (which has triple-A ratings from S&P) for the first time Aug. 9, when its shares rose as much as 6.1 percent to $374.61 on the Nasdaq Stock Market, giving it a capitalization of $347.3 billion. Apple, Bloomberg noted, has already eclipsed Microsoft, IBM Corp. and Intel Corp., whose dominance of the technology industry in the 1990s helped nudge Apple to the fringes of the PC market.

Other Tech Giants

Today's tech world is no longer dominated by Apple and Microsoft. However, search giant Google Inc. and other tech behemoths have not received top-notch credit ratings from S&P:

Firm Credit Rating/Outlook

Microsoft (No. 1 OS seller for PCs) AAA/Stable

Google (Owner of Google, world's most visited site) AA/Stable

Intel Corp. (Producer of chips used in most PCs) A+/Stable

Cisco Systems Inc.(IP-based networking provider) A+/Stable

IBM Corp. (IT infrastructure services provider) A+/Stable

Hewlett Packard (No. 1 seller of PCs) A/Stable

EBay Inc. (Top site for buying/selling) A/Stable

Oracle Corp. (Enterprise software provider) A/Stable

Amazon.com Inc. (Largest e-commerce retailer) A/Stable

Sony Corp. (Electronic products vendor) A-/Negative

Adobe Systems (Flash, other software provider) BBB+/Stable

Nokia Oyj ([Then] top seller of smartphones) BBB/Negative

Netflix (Online seller of movies, videos) BB+/Stable

Sprint Nextel Corp. (U.S. communications company) BB-/Negative

Advanced Micro Devices (Rival to Intel) B+/Stable

In July 2010, S&P raised AMD's ratings to 'B+' following "improved operations and leverage." The outlook is stable, reflecting S&P's expectation that AMD "will sustain recent operating trends despite ongoing high levels of business risk."

In October 2010, S&P raised its corporate credit rating on Los Gatos, Calif.-based Netflix Inc. to 'BB+' from 'BB-'. "The ratings on Netflix reflect our view that the company has transitioned its business from a DVD rental business to both a streaming and DVD-by-mail business and has maintained a moderate financial profile while rapidly growing," said S&P credit analyst Jayne Ross.

S&P raised in February its corporate credit rating on Seattle-based Amazon.com to 'A' from 'A-', and gave a 'stable' outlook. "The upgrade reflects the company's strong performance during the recession, a weak retail environment and increased investment in its business while maintaining already above-average credit protection profile," said Standard & Poor's credit analyst Jayne Ross, "as well as conservative financial policies." S&P noted that there are business risks from rapid growth, possible margin erosion, and participation in the mature and highly competitive retail industry.

"The rating on Cisco reflects the company's strong leadership position in the network equipment industry, consistent cash flow generation, and an exceptional liquidity profile," S&P said in March, noting that it expects Cisco to maintain its "minimal financial risk profile".

S&P hasn't done any changes to Google's credit ratings in the past 13 months. As for Google's shares, in July this year, Standard & Poor's Equity Research cut its rating on Google from "strong buy" to "buy". The company's stock has "risen more than 30% from its low on June 27, the day before Google+ was announced, and we see less upside to our 12-month target price of $700," wrote Scott Kessler in a note to investors. "We see solid fundamentals and an attractive valuation, but have concerns about looming legal and regulatory issues, including patent matters related to Android and the FTC's investigation into the company." In addition, he said "we expect some growing pains related to G+, especially as it becomes more broadly available."

In the second quarter, Apple surpassed Nokia as the top seller of smartphones. S&P early this month, S&P lowered its long-term corporate credit rating on Finland-based Nokia Corp. to 'BBB' from 'BBB+' and gave a 'negative' outlook. "The rating actions reflect the continued erosion of Nokia's smartphone market shares and a downward revision of our base-case assessment for the operating margins of Nokia's Devices & Services segment until Nokia has completed the adoption of Microsoft's Windows Phone as its new primary software platform for smartphones," said Standard & Poor's credit analyst Matthias Raab.

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