Applied Materials (NASDAQ:AMAT) announced yesterday that it authorized a plan to buy back as much as $3 billion in stock over three years. The new program follows a $2 billion buyback program instituted in 2001, under which the circuit manufacturing equipment company repurchased nearly 48 million shares. In fact, in the last quarter alone, the firm scooped up 3 million shares.

Sound impressive? Think again: Even with all this repurchasing, Applied Materials' shares outstanding have steadily risen over the past seven quarters, adding up to an increase of about 41 million shares since April 2002. With a float of nearly 1.7 billion shares, this extra stock doesn't constitute much dilution, but investors shouldn't be wowed by a repurchase program that has yet to contribute to shareholder value.

The buyback program appears to be one way Applied Materials offsets the effects of option grants to its employees. Last year alone, published reports indicate that employees realized $355 million from the exercise of options.

A proposal to add 70 million shares to stock available under Applied Materials' employee stock option plan was a point of contention at the company's recent annual shareholders' meeting. The proposal drew opposition from large investor groups, including the California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS). Nevertheless, the measure earned shareholder approval.

For now, Applied Materials investors may prefer to focus on its improving performance. Fiscal first-quarter revenue jumped 48% year over year to $1.56 billion, while net income came in at $82 million vs. a year-ago net loss of $66 million. And the firm is forecasting more of the same. Yesterday, Applied Materials' chief financial officer expressed his belief that the upturn has just begun. If Applied Materials can keep dilution to a minimum, the results going forward should be even sweeter.

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Fool contributor Brian Gorman does not own shares of any companies mentioned here.