S&P Assigns BB Rating to salesforce.com (CRM); Outlook Stable
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Standard & Poor's Ratings Services today assigned its 'BB' unsolicited corporate credit rating to salesforce.com Inc. (NYSE: CRM). The rating outlook is stable. We also assigned a 'BB' unsolicited issue-level rating to the company's $1.15 billion convertible senior unsecured notes due 2018. The unsolicited recovery rating on these notes is '3', indicating our expectation of meaningful recovery (50% to 70%)
for noteholders in the event of a payment default.
"The rating on Salesforce.com Inc. reflects our assessment of the company's business risk profile as 'satisfactory' and our view of its financial risk as 'significant'," said Standard & Poor's credit analyst Philip Schrank. The company possesses a meaningful recurring revenue stream, and generates strong free cash flow. However, its narrow focus and an acquisitive growth strategy temper our view of its business risk profile.
With fiscal 2013 revenues exceeding $3 billion, Salesforce has a leading market share in CRM and Platform as a service, but also faces significant competition from much larger, broader-based and well capitalized software competitors (Oracle Corp. [A+/Stable/A-1+], SAP [unrated], and Microsoft Corp. [AAA/Stable/--]).
The stable outlook reflects our view that Salesforce.com will maintain its leading market position, continued profitability, and strong cash flow generation. The outlook incorporates our view that the company will pursue its growth strategy, and manage debt to EBITDA at 4x or below over the near term, limiting upside ratings potential.
We could lower the rating if the company's competitive position diminishes and affects profitability, or if its financial policy becomes more aggressive whereby it sustains leverage above 4.0x.
for noteholders in the event of a payment default.
"The rating on Salesforce.com Inc. reflects our assessment of the company's business risk profile as 'satisfactory' and our view of its financial risk as 'significant'," said Standard & Poor's credit analyst Philip Schrank. The company possesses a meaningful recurring revenue stream, and generates strong free cash flow. However, its narrow focus and an acquisitive growth strategy temper our view of its business risk profile.
With fiscal 2013 revenues exceeding $3 billion, Salesforce has a leading market share in CRM and Platform as a service, but also faces significant competition from much larger, broader-based and well capitalized software competitors (Oracle Corp. [A+/Stable/A-1+], SAP [unrated], and Microsoft Corp. [AAA/Stable/--]).
The stable outlook reflects our view that Salesforce.com will maintain its leading market position, continued profitability, and strong cash flow generation. The outlook incorporates our view that the company will pursue its growth strategy, and manage debt to EBITDA at 4x or below over the near term, limiting upside ratings potential.
We could lower the rating if the company's competitive position diminishes and affects profitability, or if its financial policy becomes more aggressive whereby it sustains leverage above 4.0x.
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