Blackbaud Inc. is placing a heavy bet on itself in a move that should make its biggest shareholder happy. Starting Friday and continuing through the month, the Daniel Island software company will spend up to $38 million to buy 6 percent of its own stock, 2.6 million shares in all, in a tender offer it announced earlier this week.

The wager assumes the company is slightly undervalued on Wall Street. The Blackbaud board of directors approved the plan at a special meeting Tuesday. The company said it will pay $14.50 a share, 5.4 percent more than the stock's price at the market's close Tuesday.

"We generate a lot of cash, and this is a good way for us to continue to work with investors," said Brad Braddock, Blackbaud's director of marketing. "This is, in our estimation, a good way to deploy the cash."

Much of that cash probably will go to Hellman & Friedman Capital Partners III, a San Francisco-based investment bank that acquired a majority stake in Blackbaud in 2000. Two of Blackbaud's six board members are from Hellman & Friedman. In the same announcement, the venture capital firm said it will offer to sell to Blackbaud 24 million of the investment firm's 26.5 million shares. If no other stockholders tender their shares during the month, Blackbaud would be obligated to buy all 2.6 million of the shares in its offer from Hellman & Friedman.

"We don't know what (Hellman & Friedman) plans to do ... but they're certainly not running for the hills or anything," Braddock said. "They're professional investors, and we expect they'll proceed in a measured way."

Hellman & Friedman still will own more than half of Blackbaud's outstanding stock after the repurchase is complete. The deal has positive and negative implications for other Blackbaud shareholders. The buyback is predicted to increase the company's earnings per share by a penny or two, and the offer is a little above current market prices, which shows that the company is confident about its future.

Bank of America analysts said the deal is "an incremental positive" because it transfers ownership from private-equity partners.But Blackbaud will burn through about 88 percent of its cash in the process, according to its financial statements. Also, the market always is wary of major shareholders selling big chunks of stock. Shares of Blackbaud fell 5.1 percent to $13.06 in trading Wednesday on Nasdaq. Blackbaud went public last July.

In February, the company's board approved a plan allowing the company to buy back up to $35 million worth of stock. Unlike the current tender offer, that buyback did not specify a price, but instead allowed the company to buy its shares at market prices. Such repurchase programs are common at publicly traded companies, as they allow businesses to fight off unwanted acquisition attempts and control the liquidity of their stock.

The company's first few months in the public eye have been positive. In the most recent quarter, Blackbaud posted $10.9 million in net income compared with $4 million in the first quarter of 2004. Revenue in the first three months of the year jumped from $31.4 million to $37.3 million, an 18.9 percent increase. The Daniel Island firm also said it is seeing "good traction" on a host of products it rolled out last year and is winning more big accounts. In the past 12 months, the company's average deal size rose about 20 percent, from $25,000 to almost $30,000. As of Wednesday's close Blackbaud stock had surged 53 percent from when it hit the market in July. It has dropped 10.9 percent so far this year.