Eastman Kodak (EK) has authorized a stock repurchase program totaling as much as $1 billion of the firm’s outstanding common stock - approximately 25% of all shares outstanding, according to a press release released by the company yesterday.

The program, which has been authorized through 2009, will largely be funded by the $581 million tax refund the firm received this year.

Given the fact that Kodak is coming off a first quarter loss and its stock is currently near its 52-week low, you might expect them to prudently hoard their cash for a future economic upturn. To put the planned buyback into perspective, consider what Eastman Kodak could conceivably do with $1 billion: product development, marketing and advertising, or dividends for its shareholders.

The Board of Directors’ belief that the company’s cash can best be spent on the company’s stock attests to how much confidence the Board has in its shareprice.

A recent insider purchase may confirm the Board’s apparent optimism. On May 6th, Dennis Strigl, a member of the Board and Verizon’s (VZ) COO, bought 2,000 shares at $17.06 a share. Admittedly, that isn’t an enormous expenditure; however, there are many reasons why an insider might sell a stock, but generally only one reason to buy it - and that’s to make money.

So what exactly is the board so excited about? Your guess is as good as mine: As of this writing, the company is trading at about 22.3 times the current annual estimate of 63 cents a share.

Some might argue that the company authorized the repurchase to fend off the bears, provide some support for the waning share price and boost earnings per share going forward. But, given the sheer scope of the buyback, I don’t believe that’s the case. Only time will tell if the repurchase program is a brilliant strategic move - or a fool’s errand.

Eastman Kodak closed at $14.03 - up $1.69 or 13.7% on the day.