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.