Yahoo Inc. on Thursday said its board has approved a stock buyback of up to $3 billion of outstanding shares.

Under the program, stock would be repurchased from time to time over the next five years, depending on market conditions, share price and other factors. The buyback is effective this month.

"This stock repurchase program demonstrates the confidence we have in our company and shows our commitment to deliver long-term shareholder value," Terry Semel, chairman and chief executive officer of Yahoo, said in a statement. "The cash productivity of our business model enables us to actively invest cash in areas that we believe will drive future value for shareholders, such as stock repurchases."

The buyback will be funded using the company''s working capital. As of Dec. 31, Yahoo had cash, cash equivalents and marketable securities of approximately $4.6 billion. As of March 4, the company had 1.4 billion common shares outstanding.

A company uses stock buybacks in order to reduce the number of outstanding shares, an indication that management believes the shares are undervalued.

Yahoo, based in Sunnyvale, Calif., recently completed a $500 million stock-buyback program approved by the board in March 2001.