Sept. 25 (Bloomberg) -- Microsoft Corp. Chief Executive Officer Steve Ballmer said demand for computer software will probably be hurt by the U.S. financial crisis.

Given the number of programs that U.S. corporations buy, ``it would be reasonable to expect there will be consequences,'' Ballmer, who runs the world's largest software maker, said in an interview before a speech yesterday in Bellevue, Washington. ``Nobody knows exactly what's going to happen.''

Business spending on software and equipment is likely to slow as the U.S. faces ``grave threats'' to financial stability, Federal Reserve Chairman Ben Bernanke said yesterday. The government has responded by proposing a $700 billion bailout fund to alleviate the pressure on financial companies and spur lending. Companies also may respond with caution, Ballmer said.

``It would be really imprudent for anybody to not have that in mind,'' Ballmer said.

Technology spending had slowed even before the financial crisis worsened over the past two weeks. Almost half of large companies have cut their budgets this year to cope with the slump, according to a report this month from Forrester Research Inc. in Cambridge, Massachusetts.

Microsoft, which in July raised investor concerns by announcing spending increases, probably will use the slump as a chance to ``invest more in our future than the other guys we're competing with,'' said Ballmer, 52.

The Redmond, Washington-based company rose 89 cents, or 3.5 percent, to $26.61 by 4 p.m. New York time in Nasdaq Stock Market trading. The shares have dropped 25 percent this year, dragged down by a disappointing annual profit forecast and an unsuccessful takeover fight with Yahoo! Inc.

Microsoft Buyback

Microsoft plans to buy back as much as $40 billion in shares and raise its dividend to woo back investors. The software maker also decided to issue its first commercial paper and said it may eventually sell as much as $6 billion in debt. Standard & Poor's ranked the company AAA, the first to receive the top rating in a decade.

The ranking may help Microsoft attract investors seeking safety amid the market turmoil in the U.S. Borrowing costs have climbed since the failure of the subprime mortgage market last year, which has led to more than $500 billion in credit losses and asset writedowns since the start of 2007.

This month, Lehman Brothers Holdings Inc. collapsed and the U.S. government had to commit as much as $85 billion to saving American International Group Inc., the largest U.S. insurer. A $700 billion bailout of financial firms would help avert ``a long and painful'' recession, President George W. Bush said yesterday.

The distress has spread to other industries, with General Electric Co. lowering its annual profit forecast today for the second time this year, citing ``unprecedented weakness and volatility'' in the financial-services market.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

Last Updated: September 25, 2008 16:11 EDT