A while back, Cleveland introduced the VAS irons. From what I have been told, this iron was very good; however, the bizarre looks made it a poor seller.

Years later, we hear Cleveland is dramatically cutting back its tour presence. I wonder how bad the business is doing?

Based upon my conversations with my shop:
1. The HiBore is not a complete failure; however, it is nowhere near a "hit" and is not going to bring a "premium" price for long.
2. The CMM irons are very good, but are being outsold by TM and Cally in significant numbers. They don't have a niche as a players club or as a GI club and get it from both sides.
3. Wedges - Still good sellers
4. Never Compromise putters - OK sellers but desperately need a hit.

What have you heard?

Even if Cleveland is having a dip in sales (much like what other companies experienced in 2006 including Callaway - although Adams 3rd quarter went well) they are part of Quiksilver Inc. who acquired the parent group of Cleveland Golf, Groupe Rossignol SA, back in 2005.

Quicksilver did 1.78 Billion (with a B) in sales in 2005.

They should have enough resources to survive any "blip" in their sales.

Their Q3 results in 2006 alone showed the company up 41% with over $525 million in that quarter with overall projection for the year's net revenues in the $2.5 Billion dollar range.

Link to Q3 report with mention of "softness" in golf market...

http://news.moneycentral.msn.com/ticker/ar...p;Symbol=US:ZQK

I like to work with facts. Wanted to insert a few before any rampant speculation started.

Hope that helps.

It has been announced that Cleveland will not renew any contracts that expire this year, including Toms.

I was more than a little surpirsed.

My question is this, is the move motivatged by poor sales and a slump, or a desire to move out of the "premium" market and into higher volume "Wal-Mart" markets? Or something else?

I can't imagine it would be cheap to have a large staff and since they did add a lot of players with a big push a couple years ago I am not surprised that they would (if they are) be cutting back after a soft year.

Can't imagine a direction from the company to lower their vendor standards but it had happened many times before when excess inventory exists.

Could be some great deals this winter and into the spring from MANY manufacturers.

I'm thinking of Wilson, but it is simply speculation on my part. I don't actually think Cleveland would go in that direction.

If there is a glut of talent in their stable, wouldn't make sense to hang onto the quality player(s) - like Toms - and selectively release or non-renew players?

Cleveland is encountering financial issues.

I would guess that unless things turn around in the first half of 2007, that they will be sold.

I heard they have forgings under development in an attempt to address the CMM issues.

It was a bad acquistion by QS, as they did not have a golf background.

Thanks for the link but you posted the wrong information. "Net revenues from the company's newly acquired Rossignol and Cleveland Golf businesses totaled $76.8 million during the third quarter ended July 31, 2006."

While the article doesn't breakout the revenues between the two units, the combined revenues seem very low. Considering seasonality, I would guestimate total revenues of less then $150 million dollars. While it is a nice number, I understand the OEM business can have very tight margins. On those revenues, I would imagine a significant cost for a tour staff would be difficult to sustain. Heck, Vijay is probably getting almost 1% or more of revenues by himself.

As for it being part of a large conglomerate, we live in a world where large corporations will not tolerate underperforming units. If they aren't making their "nut," the CEO of the parent is going to demand changes (or sell the business unit). Look at GE, it will dump anything in a heartbeat.

Few, if not none, companies got hits for all of driver, irons, wedge, and putter. Cleveland is strong in wedge, that's for sure. Irons are ok, but driver has an issue.

There is no doubt that Cleveland spent $$$$ for Hibore's R&D, and it's clear that Hibore is not very popular in the mass market (even www.woot.com got one to sell, oh my god!). Ironically former Comp driver is still popular even now.

Some business decision got to be made -- either postpone the next Hibore (Cally did the similar thing for ERC) and return to the original Titanium and Comp, or uses two product lines (one for Hibore, the other for traditional one.)

Hibore might own all advanced techs, but it's market decides its fate. Something is similar -- those square drivers. In theory, they own huge MOI, but neither Nike nor Cally is sure the market will accept them. In the end Nike will have Sumo and Sumo2, Cally will have FT-i and FT-5. You got to survive to make profits.

Cleveland has HiBore and Comp. Comp is still a current driver - just not the latest and greatest.

I agree. But they need to figure out a way to get the HiBore to deliver eye-popping numbers to regular golfers. A few years ago, I went to the G2 b/c it flat out gave me 10-20 yards over the competition. It stood out with data - not marketing hype.

My shop has told me the HiBore's are difficult to sell in the age of launch monitors. Typically, they have customers pick out a few drivers to demo on the indoor range. Although the HiBore never finishes last, the problems with fitting the correct loft/shaft mean it rarely finishes first. If a customer really wants one, they will spend the time to "fit" it to the correct shaft; however, it rarely gets that far. It gets eliminated and the customer is fit to another driver.

Why would a launch monitor make it difficult to sell a HiBore?

Sorry, I could have posted that info in particular but it I was trying to emphasize the size of the conglomerate that Cleveland was part of that they may get support from.

2006 was a flat year in the golf retail sector and certainly anyone in the business (in this case Quicksilver) might be questioning their involvement. If I was them I might be reconsidering the Rossignol/Cleveland acquisition myself.

To break out Cleveland better for you here are the numbers I have from various sources.

Sources (# from a senior staff member) say that Cleveland revenues were near $200 million for 2006.

This was a company that did $4 mill. in '87, $32.5 in 1995 and just $80 million in 2001. $100 million in 2003.

Obviously margins are small and with the building of a new manufacturing facility a few years ago and rising costs of tour staff (coupled with flatter sales than would probably not have been projected) Quicksilver certainly may have issues with this unit.

From what I can tell Quicksilver pinned their 2006 Q2 plummet in profit of $34.7 million down to $3.7 strictly on Rossignol/Cleveland losses.

I guess we will really know more when they report their Q4 on December 14 and we can see in their report how bad the damage really is.

Of interest Quiksilver (with the Rossignol deal) actually only owns 63.63% of the Cleveland shares - the others are owned by certain former owners of Cleveland Golf with those people having an option to force QS to buy their shares in 2010 or QS can buy those shares at their option in 2012.

That makes the picture even murkier...

If the customer takes "possibles" off the rack into the launch monitor bay, the HiBore never wins. As a result, customers tend to drop it off their "list" before getting matched with shaft/loft combination that gives them competitive numbers.

<<Of interest Quiksilver (with the Rossignol deal) actually only owns 63.63% of the Cleveland shares - the others are owned by certain former owners of Cleveland Golf with those people having an option to force QS to buy their shares in 2010 or QS can buy those shares at their option in 2012.>>

Wow - I didn't realize the former owners had a put option in place. I hope financial pressures don't cause the QS guys to do something stupid.

While I am certainly not a Cleveland guy, I would have to see them go down the same path as my beloved Wilson Staff brand. Hogan, Ram, TopFlite, and so on. All brands damaged/ruined by bad management/financial decisions.

actually, it's because they are going to stay with their policy as before. They don;t want, or need, high-priced guys who don;t move product. David Toms has NEVER sold a club on his mane alone. They would rather sign lower guys, and grow them. It's worked before (ie, with Toms) and it'll work again.

If customers are just grabbing clubs off the shelf, doesn't that sort of defeat the purpose of a launch monitor? Where is the clubfitter?

<< If customers are just grabbing clubs off the shelf, doesn't that sort of defeat the purpose of a launch monitor? Where is the clubfitter? >>

Place a Hibore on a launch monitor with a stock shaft against competitive heads with their stock shafts, the HiBore will finish near the bottom in terms of distance/balllspeed. It doesn't generate it's best numbers until the client has been fully fitted with the right shaft/head combination

Once that happens, the customer boots it from their list. When the fitting occurs, the client usually has picked 1 or 2 heads. Since most heads are quite good, the fitter won't talk the customer out of their selection UNLESS the client has made a major error (slicer picking an open faced Titty driver). For example, they are never going to talk a client out of a R7, Ft-3, SQ just because they like the HiBored.

As a result, the fitter spends their time fitting the selected head to the customer.

Update to my earlier financial info.

Have been informed that Quicksilver exercised the stock options late last year to get into control of at least 95% of shares with 96% of voting rights then had plan to buy control of all shares soon after.