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Callaway’s problems run deep
Changing the head man is only the beginning
By ED TRAVIS
Changing the head man is only the beginning
By ED TRAVIS
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Callaway Golf (NYSE:ELY) has a new President and
Chief Executive Officer. Anthony Thornley took over
after George Fellows resigned “for personal
reasons” but there is little doubt he was asked to
depart.
Fellows, who previously was the top executive at
Revlon, Inc. was cross country commuting to
Carlsbad, Calif. headquarters and cited the long
distance and spending more time with his family
effecting his decision to leave. Thornley at age 65, on
the Callaway board of directors for seven years,
comes to the CEO position with a background in
technology; specifically he was President of
Qualcomm Inc.
On Fellows watch Callaway, the once industry-
dominant club manufacturer, seemed to lose its way,
eventually falling well behind principle rival TaylorMade
Golf Company in clubs and never able to mount an
effective challenge to Acushnet Company in golf balls.
Financial performance in recent years has been
disappointing to say the least. For the quarter ended
June 30 sales fell by ten percent compared to the
same period in 2010 and a $11.5 million profit
plummeted to a $55 million loss. In the past 12
months sales were $916 million, another year in the
downward trend from their high of $1.12 billion in 2007.
The biggest money maker for club companies are
drivers, the glamour clubs, and Callaway was the
innovator that started the explosion of driver
technology when they introduced the Big Bertha. Today
not only is Callaway a distant second in driver sales
more or less tied with Titleist (an Acushnet brand) but
Callaway has relinquished its previous number one
spot in irons with TaylorMade taking over in that
segment as well.
Chief Executive Officer. Anthony Thornley took over
after George Fellows resigned “for personal
reasons” but there is little doubt he was asked to
depart.
Fellows, who previously was the top executive at
Revlon, Inc. was cross country commuting to
Carlsbad, Calif. headquarters and cited the long
distance and spending more time with his family
effecting his decision to leave. Thornley at age 65, on
the Callaway board of directors for seven years,
comes to the CEO position with a background in
technology; specifically he was President of
Qualcomm Inc.
On Fellows watch Callaway, the once industry-
dominant club manufacturer, seemed to lose its way,
eventually falling well behind principle rival TaylorMade
Golf Company in clubs and never able to mount an
effective challenge to Acushnet Company in golf balls.
Financial performance in recent years has been
disappointing to say the least. For the quarter ended
June 30 sales fell by ten percent compared to the
same period in 2010 and a $11.5 million profit
plummeted to a $55 million loss. In the past 12
months sales were $916 million, another year in the
downward trend from their high of $1.12 billion in 2007.
The biggest money maker for club companies are
drivers, the glamour clubs, and Callaway was the
innovator that started the explosion of driver
technology when they introduced the Big Bertha. Today
not only is Callaway a distant second in driver sales
more or less tied with Titleist (an Acushnet brand) but
Callaway has relinquished its previous number one
spot in irons with TaylorMade taking over in that
segment as well.
TaylorMade’s success (roughly 50 percent of the driver
business) is in the face of the severe downturn in club
sales over the past four years that only now may be
starting to turn around. Callaway does not seem to be
participating and having ceded their leadership
position may be a long time, if ever, getting it back.
TaylorMade has shown that the best performing clubs
combined with aggressive marketing creates
dominance which is also an apt description of how
Callaway reached the top spot 20 years ago. Recently
Callaway has been a little like watching a train wreck
in slow motion or put another way they have had their
lunch eaten by TMaG losing the top spots in the two
important market segments.
Another example of the mess while Fellows was at the
helm is golf balls. In 2003 when the number two ball
maker Top-Flite went bankrupt Callaway won the
bidding against TaylorMade. The assumption was
with Top-Flite’s technical knowledge, Callaway’s
financial muscle and supposed marketing expertise
they would become a challenger to Acushnet’s Titleist
who sell the segment leading Titleist Pro V1.
business) is in the face of the severe downturn in club
sales over the past four years that only now may be
starting to turn around. Callaway does not seem to be
participating and having ceded their leadership
position may be a long time, if ever, getting it back.
TaylorMade has shown that the best performing clubs
combined with aggressive marketing creates
dominance which is also an apt description of how
Callaway reached the top spot 20 years ago. Recently
Callaway has been a little like watching a train wreck
in slow motion or put another way they have had their
lunch eaten by TMaG losing the top spots in the two
important market segments.
Another example of the mess while Fellows was at the
helm is golf balls. In 2003 when the number two ball
maker Top-Flite went bankrupt Callaway won the
bidding against TaylorMade. The assumption was
with Top-Flite’s technical knowledge, Callaway’s
financial muscle and supposed marketing expertise
they would become a challenger to Acushnet’s Titleist
who sell the segment leading Titleist Pro V1.
Not only has that not happen but for the past five years
as Callaway saw an erosion of their ball sales, the two
companies have been battling to out not on the tees
and greens but in patent court. Callaway instigated
law suits accusing Acushnet of violating old Top-Flite
patents. Here’s link to the history of this fiasco which
has not only diverted lots of money but more
importantly the attention of people who might more
profitably be making and selling better golf balls.
Acushnet aces Callaway
A reasonable question is why did Callaway pursue
this strategy? Well, maybe they didn’t have a
competitive product or perhaps they saw it as a
cheaper way to beat Acushnet’s Titleist brand which
had and still has over 50 percent of the market. Who
knows, but from the beginning one thing was known,
the patents in question had been ruled invalid by the U.
S. Patent Office so all the legal maneuvering was
either inept, very poor decision making or both.
In any case it appears to be a huge misjudgment by
management.
Callaway’s problems run deep. They have to make
$50 million in cuts including personnel, according to
the board chairman Ron Beard, while at the same
time some how coming up with better marketing
programs “to strengthen our brand.” One may be
forgiven thinking this sounds like so much corporate
hogwash but more likely is yet another indication of
Callaway’s problems.
They appear to have forgotten what they did to become
the fastest growing golf company in the world –
making and marketing the best performing clubs. Let’
s hope they remember that simple fact before its too
late.
as Callaway saw an erosion of their ball sales, the two
companies have been battling to out not on the tees
and greens but in patent court. Callaway instigated
law suits accusing Acushnet of violating old Top-Flite
patents. Here’s link to the history of this fiasco which
has not only diverted lots of money but more
importantly the attention of people who might more
profitably be making and selling better golf balls.
Acushnet aces Callaway
A reasonable question is why did Callaway pursue
this strategy? Well, maybe they didn’t have a
competitive product or perhaps they saw it as a
cheaper way to beat Acushnet’s Titleist brand which
had and still has over 50 percent of the market. Who
knows, but from the beginning one thing was known,
the patents in question had been ruled invalid by the U.
S. Patent Office so all the legal maneuvering was
either inept, very poor decision making or both.
In any case it appears to be a huge misjudgment by
management.
Callaway’s problems run deep. They have to make
$50 million in cuts including personnel, according to
the board chairman Ron Beard, while at the same
time some how coming up with better marketing
programs “to strengthen our brand.” One may be
forgiven thinking this sounds like so much corporate
hogwash but more likely is yet another indication of
Callaway’s problems.
They appear to have forgotten what they did to become
the fastest growing golf company in the world –
making and marketing the best performing clubs. Let’
s hope they remember that simple fact before its too
late.
