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The board of directors of Large Cap Watch List member Accenture (NYSE:ACN) approved a $1.5 billion share buyback authorization. The only question we have is: Why so little?

The amount is consistent with the company’s share repurchases in each of the last two years, so the amount was probably already factored into street expectations. The company generated $2.7 billion in cash from operations in its August 2006 fiscal year, and only needed $300 million to invest in new equipment given the knowledge-based (rather than asset-based) nature of its business.

So it would seem the company should be able to afford something more like $2 billion. But even that would cause cash to pile up further on the balance sheet, which already shows a $2.7 billion hoard against virtually no debt. And speaking of debt, maybe they should consider taking some on to recapitalize (use for share repurchases). It seems like a reasonable value at 9x free cash flow, which by our reckoning values the company as though it will not grow - and the strong cash flow should be sufficient to support a reasonable amount of debt.

The board should certainly be considering all of these options. If they don’t do it, a private equity buyer might.

Source: Accenture's Share Buyback Plan Just a Drop in the Bucket