Technology can pull the United States out of recession and help the world's ailing financial markets work better, Microsoft Corp Chairman Bill Gates told a high-level business summit at the company he co-founded.

The drug companies will get back in high productivity mode. The software, IT revolution -- we're just at the start of that, said Gates at Microsoft's annual CEO Summit at the company's campus near Seattle.

What we can do for education, communication, and what that looks like for the efficiencies of world markets, we are just at the beginning of that.

Gates, who focuses on health and education issues at his Bill & Melinda Gates Foundation since giving up his day-to-day role at the world's largest software company last year, made the remarks on Wednesday at the private event, and they were made available publicly early Thursday.

The opportunities for innovation are stronger today than ever, Gates told the audience, which included billionaire investor Warren Buffett -- the world's second richest man behind Gates himself -- alongside News Corp Chairman Rupert Murdoch and Amazon.com Inc Chief Executive Jeff Bezos.

Despite the fact that Microsoft is laying off 5,000 employees, Chief Executive Steve Ballmer also struck an optimistic note, saying the business world is only coming into halftime of the Internet revolution.

He downplayed fears that the recession would choke off investment in technology start-ups from venture capital (VC) firms.

The VCs are pulling back, said Ballmer. The seventh, eighth, and ninth copy of the idea won't get funded today, but most good propositions are still going to get funded. There's plenty of venture capital out there, relative to ideas.

He said research and development spending was also strong.

I don't know anybody in our industry actually who's cutting their R&D budget, said Ballmer. I know people who are doing a lot of different things, but most people are not slashing their R&D budget.

Microsoft's research chief Craig Mundie said in February the company was not cutting back on its $9 billion R&D budget this fiscal year.

(Writing by Bill Rigby, editing by Gerald E. McCormick)