Microsoft Corp. (MFST) is selling long-term debt for the first time Monday, and investors looking for quality bonds are lining up for the deal.

Microsoft, the world's largest software maker, said it will sell notes maturing in five, 10 and 30 years. The size wasn't set, but the deal saw $15 billion in orders, according to an investor.

In its prospectus, Microsoft said it will use net proceeds from the sale for general corporate purposes, including working capital, capital expenditures, and repurchases of its capital stock.

Microsoft is a "super blue chip name" and "everyone's going to be involved" in its debt deal - particularly pension funds and insurance companies that would hold onto it and not flip it, said Mike Kastner, head of fixed income at Sterling Stamos Capital Management.

"It's a nice diversifier," he said. "It has a lot of characteristics that people want in their portfolios."

Investors can compare this to debt from government-sponsored enterprises Fannie Mae (FNM) and Freddie Mac (FRE) or earlier deals from Berkshire Hathaway (BRKA), he said.

Another portfolio manager compared Microsoft's new debt to that of high quality industrial companies such as 3M Company (MM) and Johnson and Johnson (JNJ).

Indeed, the risk premium being offered on the Microsoft deal, according to price guidance, is low, showing that investors are willing to accept less to own the bonds.

The five-year note is seen around 95 basis points over comparable Treasury yields, and the 10-year and 30-year around 105 basis points over Treasurys, according to three people familiar with the offering.

"This deal shows a continuation of a flight to quality that started last December, and portfolio managers trying to invest an abundance of cash in this fixed-income rally," said James Lee, senior fixed-income analyst at Calvert Asset Management Co.

 
   Triple-A Status

Microsoft is one of the few industrial companies with the top, triple-A credit rating. Only Exxon Mobil, Automatic Data Processing and Johnson & Johnson also carry the triple-A rating from both Moody's Investors Service and Standard & Poors. S&P also rates Pfizer triple-A, but that rating is on watch for downgrade.

Microsoft's credit default swaps, which indicate creditworthiness, are among the lowest for US companies, showing the investors consider it among the least risky, according to CMA DataVision.

Microsoft was given the top AAA rating by Standard & Poors in September when it initially filed to tap debt markets. At the time, Microsoft said it could raise up to $6 billion from time to time for general purposes, including stock buybacks.

Currently, there is $2 billion in commercial paper outstanding that was authorized from the September announcement, according to a Microsoft spokesman.

The company, headquartered in Redmond, Wash., said that through March, it has more than $25.3 billion in cash or cash equivalents on its balance sheet.

While Microsoft has said it would use the money for general corporate purposes, some have speculated the software giant could use the funds for a major purchase, such as for Yahoo Inc. (YHOO) and SAP AG (SAP). Microsoft is said to be in talks with Yahoo over an exchange of Internet search assets; Microsoft, since Yahoo spurned last year, has repeatedly stated that it is no longer interested in buying the whole Internet company.

A SAP acquisition, meanwhile, is seen as increasing Microsoft's presence in business software. SAP Co-Chief Executive Leo Apotheker, at a meeting with reporters Monday in New York City, declined to comment on speculation that Microsoft was raising funds to acquire SAP.

Microsoft last month posted a 32% drop in net profit and the first quarterly revenue decline in its 23-year history as a publicly traded company, as nearly all of the company's business units were hit by the recession. Four of its five business units recorded lower sales. The company, whose Windows operating system is on around 90% of the world's personal computers, has been hit hard by a slump in global PC sales. Microsoft, in an effort to lower costs, has cut almost 5,000 jobs since January, the first significant round of layoffs in the company's history.

In the past year, Microsoft's stock has slumped by around 30% in the past year. Monday, Microsoft shares dropped 4 cents to $19.39.

Yahoo shares rose 3.2% Monday to $15.63. SAP shares rose 2.6% to $40.28.

 
  -By Romy Varghese, Dow Jones Newswires; 215-656-8263; romy.varghese@dowjones.com (Kate Haywood and Jessica Hodgson contributed to this report.)