TaylorMade Adidas Golf set to buy Callaway Golf?!?!

[noodle3872]

Yesterday I was at my local Golf Town. I was talking with the store manager about the various deals each golf company has running. During the conversation about all Callaway's current deals, the store manager says "Callaway is struggling horribly and are looking at bankruptcy. As it stands now, TaylorMade is in the process of buying the Callaway Golf empire. The deal is weeks away from being done." I asked for specific confirmation but he had none to give.

 

I could see TaylorMade wanting to buy Callaway for their ball patents alone but can you imagine how much more powerful TaylorMade would become in the market place if they combined their MWT with Callaway's face technology!!! Think of how things would change in the putter side of the market if TaylorMade had Odyssey in their stable too?!

 

Is this rumour even true?

 

Mike

[PRO]

I highly doubt it....please explain to me how Callaway is struggling right now?

[mat562]

I've heard similar (albeit unsubstantiated) rumours that all is not rosy at Callaway Towers,

 

Whether it's true or not remains to be seen but when General Motors can go belly-up, anything is seemingly possible.

[MatthewT]

If they ever bought Callaway or any other OEM they would probably do it to create more competition between the two companeys.

[noodle3872]

I just got off the phone with my buddy who is a Pro at my local club. His golf business magazines are indicating Callaway's sales numbers are down substantially while TaylorMade's have been up significantly. He attributed this to the release of the R9 (and it's adjustability) versus the redoing of the FT-5 (calling it the FT-9). He felt Callaway will continue to struggle until they join the adjustable clubhead game.

 

Mike

[Slapjax7s]

totally false...Callaway is not in trouble in anyway.

[obsessedgolfer]

I just got off the phone with my buddy who is a Pro at my local club. His golf business magazines are indicating Callaway's sales numbers are down substantially while TaylorMade's have been up significantly. He attributed this to the release of the R9 (and it's adjustability) versus the redoing of the FT-5 (calling it the FT-9). He felt Callaway will continue to struggle until they join the adjustable clubhead game.

 

Mike

 

Callaway did absolutely terrible with with the Imix so they want stay as far away from adjustability as they can. The rumor might be true lets see in the last 5 years what happened to Callaway

 

Drivers.. Big Bertha was the domininant force in drivers untill TM relased the r7/Burner now TM's Burner has taken the place of the Big Bertha as the go to club in the $300 price range

 

Fairway Woods/Hybrid..Much like the driver catagory Big Bertha was the dominant FW wood, then Callawy lost their dominancy in the FW wood game and year after year TM beats them in FW sales and tour counts. Callaway never had a huge Hybrid hit, and TM and Adams domintate that catagory, TM in sales and Adams in tour counts.

 

Irons... Callaway dominated the market with the Big Bertha irons, now the X irons have taken the place of the Big Bertha as the #1 seller in callaways stable, but TM has taken a huge share of the market with the success of the Burner/r7 irons.

 

Wedges. Callaway wedges were never hot sellers neither are TM wedges. The cattogory belongs to Cleveland and Titliest.

 

Putters.. Callaway allways dominated with Oddessy but TM's Spider putter was a huge hit and turned many people on to TM Rossa putters.

 

Looking at these facts it is not "if" it is "when" Callaway will go belly up.

[iteachgolf]

I just got off the phone with my buddy who is a Pro at my local club. His golf business magazines are indicating Callaway's sales numbers are down substantially while TaylorMade's have been up significantly. He attributed this to the release of the R9 (and it's adjustability) versus the redoing of the FT-5 (calling it the FT-9). He felt Callaway will continue to struggle until they join the adjustable clubhead game.

 

Mike

 

Callaway did absolutely terrible with with the Imix so they want stay as far away from adjustability as they can. The rumor might be true lets see in the last 5 years what happened to Callaway

 

Drivers.. Big Bertha was the domininant force in drivers untill TM relased the r7/Burner now TM's Burner has taken the place of the Big Bertha as the go to club in the $300 price range

 

Fairway Woods/Hybrid..Much like the driver catagory Big Bertha was the dominant FW wood, then Callawy lost their dominancy in the FW wood game and year after year TM beats them in FW sales and tour counts. Callaway never had a huge Hybrid hit, and TM and Adams domintate that catagory, TM in sales and Adams in tour counts.

 

Irons... Callaway dominated the market with the Big Bertha irons, now the X irons have taken the place of the Big Bertha as the #1 seller in callaways stable, but TM has taken a huge share of the market with the success of the Burner/r7 irons.

 

Wedges. Callaway wedges were never hot sellers neither are TM wedges. The cattogory belongs to Cleveland and Titliest.

 

Putters.. Callaway allways dominated with Oddessy but TM's Spider putter was a huge hit and turned many people on to TM Rossa putters.

 

Looking at these facts it is not "if" it is "when" Callaway will go belly up.

 

Odyssey will always dominate the putter market in retail sales. I'm pretty sure Callaway is here to stay at least in the immediate future. All manufacturers are struggling right now.

[rymail00]

I just got off the phone with my buddy who is a Pro at my local club. His golf business magazines are indicating Callaway's sales numbers are down substantially while TaylorMade's have been up significantly. He attributed this to the release of the R9 (and it's adjustability) versus the redoing of the FT-5 (calling it the FT-9). He felt Callaway will continue to struggle until they join the adjustable clubhead game.

 

Mike

 

Callaway did absolutely terrible with with the Imix so they want stay as far away from adjustability as they can. The rumor might be true lets see in the last 5 years what happened to Callaway

 

Drivers.. Big Bertha was the domininant force in drivers untill TM relased the r7/Burner now TM's Burner has taken the place of the Big Bertha as the go to club in the $300 price range

 

Fairway Woods/Hybrid..Much like the driver catagory Big Bertha was the dominant FW wood, then Callawy lost their dominancy in the FW wood game and year after year TM beats them in FW sales and tour counts. Callaway never had a huge Hybrid hit, and TM and Adams domintate that catagory, TM in sales and Adams in tour counts.

 

Irons... Callaway dominated the market with the Big Bertha irons, now the X irons have taken the place of the Big Bertha as the #1 seller in callaways stable, but TM has taken a huge share of the market with the success of the Burner/r7 irons.

 

Wedges. Callaway wedges were never hot sellers neither are TM wedges. The cattogory belongs to Cleveland and Titliest.

 

Putters.. Callaway allways dominated with Oddessy but TM's Spider putter was a huge hit and turned many people on to TM Rossa putters.

 

Looking at these facts it is not "if" it is "when" Callaway will go belly up.

Wow. I never though of it that way but you are dead on w/ this.

 

Although I do not play really play either I would hate to see Callaway go under.

[blackcourse53]

All I know is they lost 3.2 million in the final quarter of last year and 7.4 million in the quarter before that. I haven't seen any of their financials for this year, but my guess is that it would be even worse than that. No idea though on this story. Please, keep us updated with as much info as possible.

[hef63303]

All I know is they lost 3.2 million in the final quarter of last year and 7.4 million in the quarter before that. I haven't seen any of their financials for this year, but my guess is that it would be even worse than that. No idea though on this story. Please, keep us updated with as much info as possible.

And at this pace, they will run out of money in about 15 years

[slicer365]

Yes, Callaway is in trouble. They just signed Phil to a 5 year contract. Sounds like they are in financial ruin.

[randy0077]

Callaway golf is a publicly traded company (ELY) and their market cap (share price x number of shares) is about 500 million. Over the weekend was released that Callaway's profits are down 84% which will cause the stock price to drop. So, in short, and correct me if I'm wrong, but Taylormade could pick up Callaway for 400-500 million. Can anyone either confirm my logic or make me look like an idiot?

[RangerEsq.]

I just got off the phone with my buddy who is a Pro at my local club. His golf business magazines are indicating Callaway's sales numbers are down substantially while TaylorMade's have been up significantly. He attributed this to the release of the R9 (and it's adjustability) versus the redoing of the FT-5 (calling it the FT-9). He felt Callaway will continue to struggle until they join the adjustable clubhead game.

 

Mike

 

Callaway did absolutely terrible with with the Imix so they want stay as far away from adjustability as they can. The rumor might be true lets see in the last 5 years what happened to Callaway

 

Drivers.. Big Bertha was the domininant force in drivers untill TM relased the r7/Burner now TM's Burner has taken the place of the Big Bertha as the go to club in the $300 price range

 

Fairway Woods/Hybrid..Much like the driver catagory Big Bertha was the dominant FW wood, then Callawy lost their dominancy in the FW wood game and year after year TM beats them in FW sales and tour counts. Callaway never had a huge Hybrid hit, and TM and Adams domintate that catagory, TM in sales and Adams in tour counts.

 

Irons... Callaway dominated the market with the Big Bertha irons, now the X irons have taken the place of the Big Bertha as the #1 seller in callaways stable, but TM has taken a huge share of the market with the success of the Burner/r7 irons.

 

Wedges. Callaway wedges were never hot sellers neither are TM wedges. The cattogory belongs to Cleveland and Titliest.

 

Putters.. Callaway allways dominated with Oddessy but TM's Spider putter was a huge hit and turned many people on to TM Rossa putters.

 

Looking at these facts it is not "if" it is "when" Callaway will go belly up.

Wow. I never though of it that way but you are dead on w/ this.

 

Although I do not play really play either I would hate to see Callaway go under.

 

 

Yah............ but you've also forgotten about them

 

BALLS.

 

 

The litigation battle with Acushnet, over the Pro-Vs, is yet to be finalized. If Callaway wins, that will probably mean something good will come out, otherwise if Cally loses, then that will surely spell the end.

 

But it's weird - I see so many foreign Pros and Seniors play Callaway clubs. Cally can't be doing that badly internationally.

[slicer365]

Sounds plausible, but highly unlikely. If Callaway can't make it on their own, why would TaylorMade buy them? Aside from patents? Where's the upside? Again if Callaway was hurting, why would they re-sign Phil? It doesn't add up. It won't happen.

[Left Rough]

All I know is they lost 3.2 million in the final quarter of last year and 7.4 million in the quarter before that. I haven't seen any of their financials for this year, but my guess is that it would be even worse than that. No idea though on this story. Please, keep us updated with as much info as possible.

And at this pace, they will run out of money in about 15 years

 

 

Actually, it just takes a quick look at the financial statements to see that things aren't exactly rosy.

 

They ended the year with $38M in cash, down from $50M last year and borrowed over $50M in 2008 alone.

 

There were also some interesting comments in the earnings transcript around a credit facility they have in place to maintain liquidity, layoffs, and some other issues around margins which are below.

 

I also believe they released the FT-iQ late last year (earlier than their normal release cycle) in order to make their Y/Y comps look a little better than normal.

 

Will Callaway go anywhere anytime soon? I would think it's unlikely unless the economy takes another body blow, but these days I wouldn't rule anything out, and right now cannot survive without taking on more debt.

 

But step away from the products themselves and shop anecdotes, and I think the numbers say a lot more about what's happening at ELY. They have not been spared from the crisis and no one can just simply say that 'things are be fine'.

 

For the record, I hope they survive and thrive independently, and definitely do not get involved with TMAG M&A.

 

 

---------------------------------------------------

 

Brad Holiday

 

"As you know, our business is seasonal with our peak borrowing occurring during the second quarter of the year. Because of the decline in EBITDA and the seasonal borrowings, we are in discussions with our banks to amend our credit facility to make sure we remain in compliance with the financial covenants under the facility."

 

---------------------------------------------------

 

Hayley Wolff - Rochdale Securities LLC

 

A couple questions. First, the amendment to your credit line, can you talk about what is that going to cost you and where you're looking to get extra room?

 

Brad Holiday

 

No, we really can't discuss it right now, Hayley, other than we are in conversation with our banks and just want to make sure that we can maintain liquidity going forward. We'll announce it when we're done, but we really can't talk about it right now.

 

 

---------------------------------------------------

 

Scott Hamann - Keybanc Capital Markets

 

Okay, Brad, on the work force reduction, what level of cost savings do you expect to realize there and were there any severance charges that were buried in your operating expenses during the quarter for that?

 

Brad Holiday

 

We're not going to give the total on that, but I would tell you this, that in Q2 it will probably be more of a cost to us because we will have severance costs, but we'll have more net savings towards the end of the year. But it's all built into our forecast. That's in that 375 to 400. But we didn't get into the details of the specific savings.

 

 

---------------------------------------------------

[WhiteStripe]

I just got off the phone with my buddy who is a Pro at my local club. His golf business magazines are indicating Callaway's sales numbers are down substantially while TaylorMade's have been up significantly. He attributed this to the release of the R9 (and it's adjustability) versus the redoing of the FT-5 (calling it the FT-9). He felt Callaway will continue to struggle until they join the adjustable clubhead game.

 

Mike

 

Callaway did absolutely terrible with with the Imix so they want stay as far away from adjustability as they can. The rumor might be true lets see in the last 5 years what happened to Callaway

 

Drivers.. Big Bertha was the domininant force in drivers untill TM relased the r7/Burner now TM's Burner has taken the place of the Big Bertha as the go to club in the $300 price range

 

Fairway Woods/Hybrid..Much like the driver catagory Big Bertha was the dominant FW wood, then Callawy lost their dominancy in the FW wood game and year after year TM beats them in FW sales and tour counts. Callaway never had a huge Hybrid hit, and TM and Adams domintate that catagory, TM in sales and Adams in tour counts.

 

Irons... Callaway dominated the market with the Big Bertha irons, now the X irons have taken the place of the Big Bertha as the #1 seller in callaways stable, but TM has taken a huge share of the market with the success of the Burner/r7 irons.

 

Wedges. Callaway wedges were never hot sellers neither are TM wedges. The cattogory belongs to Cleveland and Titliest.

 

Putters.. Callaway allways dominated with Oddessy but TM's Spider putter was a huge hit and turned many people on to TM Rossa putters.

 

Looking at these facts it is not "if" it is "when" Callaway will go belly up.

 

Stupid post of the day, you win. Callaway is not going belly up. True, TM has taken over as the leader in Drivers, but Callaway is still number one in irons. What would you rather have, the margin of manufacturing and selling 8 clubs or 1? And even if Cally loses the iron lead to TM (possible, but not a done deal), there is nothing wrong with being #2. Putters are very high margin products and Odyssey just about sells more putters than the next 5 OEMs on the board combined. Spider was a big hit relative to TM, but relative to Odyssey, it's a joke of a putter at $200.

 

Callaway, like a lot of of other companies these days, is in for some bad numbers and that means downsizing. So what. Cally has plenty of product in the pipeline, a huge distribution channel, strong market share, and plenty of upside. Some Cally employees should be worried, but the company is not going off the map.

 

Callaway golf is a publicly traded company (ELY) and their market cap (share price x number of shares) is about 500 million. Over the weekend was released that Callaway's profits are down 84% which will cause the stock price to drop. So, in short, and correct me if I'm wrong, but Taylormade could pick up Callaway for 400-500 million. Can anyone either confirm my logic or make me look like an idiot?

 

Your basic math, and therefore logic are fine, they just don't apply in the real world. It doesn't make you an idiot, it's a good question. First of all, no one is buying Cally at a discount to the market, so if the market cap right now is $500M, then that's what you can buy them for if it was possible to buy all shares at once at market rates, which it is not. If you want to buy a publicly traded company with a lot of institutional investors then you need a lot of cooperation, and that's going to cost more than the current share price. You have to offer a price above market rates high enough to make the decision for the major shareholders an easy one. So in theory, it would cost TM more like 700-800 million, maybe more if there were other offers.

 

This is how dumb the original topic is: If some moron in a golf shop is talking out of their a** about TM taking over ELY in the coming weeks, then the stock would be at a premium, not flirting with a dead cat bounce on minor news. Had ELY stock been over 10, quickly rising from 7 and there was not any financial news, then something could be brewing. Recent case in point. At the end of March Sun Microsystems was roughly a $4.50 stock, then out of nowhere it shoots to $9, rumors are flying about IBM is buying SUN. So the stock nearly doubled even though SUN was losing money every quarter. No one thought IBM was going to get SUN at the then market cap of roughly $3.5B. When IBM backs out of talks the stock dives back down to the low 6's, why not back to the 4's? Because even though SUN is bleeding money, they are in play, and you have to pay some kind of market premium to get all shares. A few days later, in steps Oracle, and now the stock is back to $9. So if TMAG really wanted ELY, it's not going to happen at $8/share, more like $12, perhaps $15. Not that it matters, because it's NOT HAPPENING!

[slicer365]

I don't mean to thread jack, but I'm a late night guy, and I have late night feeding duties for my newborn, so I often daydream, and my wheels began to spin, on a few things between Callaway and TaylorMade. So, now that we are talking mergers and buyouts, I personally don't think Callaway is a good fit for TMAG. For several reasons:

 

a. TMAG has the most popular drivers on tour.

b. TMAG has success with their irons.

c. TMAG makes decent wedges

d. TMAG makes o.k. hybrids

e. TMAG hasfigured out how to make great golf balls

f. TMAG has finally turned the corner in putter design.

g. Callaway has no shoe line to speak of, or nobody wears them at least.

 

I don't see a reason TaylorMade would want Callaway. They have made a pretty good name for themselves and it would be a wash at very best. O.k., so they capitalize on patents, but I still don't see a niche. Now who do I think would be a great fit for Callaway...Nike!!!

 

I think the two would co-exist and be a strong contender. NIKE has good not great products and no putter line to speak of. Just think if NIKE owned Odyssey, overnight, NIKE owns the best selling putter in the market. NIKE makes good irons and wedges, but what if Roger Cleveland could give Tom Stites a lesson or two about iron and wedge design. I think the two could co-exist and if they put their egoes aside for minute. Driver design, for years Callaway has been a leader, NIKE could incorporate some of their patents into their drivers, powerbow meets fusion and hyperbolic face technology. Not to mention balls, think of the impact these two companies might have in this merger.

 

How would I do it? Well, I'd look at Acushnet. They have both Titleist and Cobra. Titleist being more of the players brand, while Cobra is the mid to high handicappers' brand. Both companies have pro golfers sporting their products. I would have tour line equipment for both. Of course, NIKE would be the Titleist and Callaway would be the Cobra. NIKE puts out the forged tour type irons and AP1 type irons, while Callaway has Pro CB type irons with focus on the aspiring golfer and the weekend hacker. Let NIKE and Callaway have their own wedge line, maybe have a line out for Tiger and one for Phil.

 

Tiger and Phil under the same company, think of the impact!!! Phil's always plays second fiddle to Tiger, so it's not a huge shift in power taking place.

 

Just a thought.

[WhiteStripe]

but what if Roger Cleveland could give Tom Stites a lesson or two about iron and wedge design.

 

Huh? Stites is doing just fine as a designer, he really doesn't need RC, no disrespect to RC.

 

Nike would much rather beat ELY in the marketplace straight up then waste hundreds of millions buying them. One could argue, maturity is all that differentiates Nike from Callaway in the marketplace.

[slicer365]

I still think Tiger is the driving force behind NIKE. The day Tiger leaves NIKE, so will NIKE Golf. You're right though. Maturity is NIKE's Achillies' Heel, as years go buy and Tiger is still raking in majors and millions with NIKE in his corner, people will buy. I agree with you, Callaway is a product of the times. Not many people are willing to shell out money on equipment, if they are sweating over job security. I have been a fan of Callaway since the WARBIRD, I hope Callaway stays for many more years. Ely would roll over in his grave, if he knew we were having this discussion, but do you think both companies could ever co-exist (NIKE/Callaway), or better yet, is NIKE a better fit than TMAG, if both were in the running to buy Callaway.

[Milo]

All I know is they lost 3.2 million in the final quarter of last year and 7.4 million in the quarter before that. I haven't seen any of their financials for this year, but my guess is that it would be even worse than that. No idea though on this story. Please, keep us updated with as much info as possible.

And at this pace, they will run out of money in about 15 years

 

 

Actually, it just takes a quick look at the financial statements to see that things aren't exactly rosy.

 

They ended the year with $38M in cash, down from $50M last year and borrowed over $50M in 2008 alone.

 

There were also some interesting comments in the earnings transcript around a credit facility they have in place to maintain liquidity, layoffs, and some other issues around margins which are below.

 

I also believe they released the FT-iQ late last year (earlier than their normal release cycle) in order to make their Y/Y comps look a little better than normal.

 

Will Callaway go anywhere anytime soon? I would think it's unlikely unless the economy takes another body blow, but these days I wouldn't rule anything out, and right now cannot survive without taking on more debt.

 

But step away from the products themselves and shop anecdotes, and I think the numbers say a lot more about what's happening at ELY. They have not been spared from the crisis and no one can just simply say that 'things are be fine'.

 

For the record, I hope they survive and thrive independently, and definitely do not get involved with TMAG M&A.

 

 

---------------------------------------------------

 

Brad Holiday

 

"As you know, our business is seasonal with our peak borrowing occurring during the second quarter of the year. Because of the decline in EBITDA and the seasonal borrowings, we are in discussions with our banks to amend our credit facility to make sure we remain in compliance with the financial covenants under the facility."

 

---------------------------------------------------

 

Hayley Wolff - Rochdale Securities LLC

 

A couple questions. First, the amendment to your credit line, can you talk about what is that going to cost you and where you're looking to get extra room?

 

Brad Holiday

 

No, we really can't discuss it right now, Hayley, other than we are in conversation with our banks and just want to make sure that we can maintain liquidity going forward. We'll announce it when we're done, but we really can't talk about it right now.

 

 

---------------------------------------------------

 

Scott Hamann - Keybanc Capital Markets

 

Okay, Brad, on the work force reduction, what level of cost savings do you expect to realize there and were there any severance charges that were buried in your operating expenses during the quarter for that?

 

Brad Holiday

 

We're not going to give the total on that, but I would tell you this, that in Q2 it will probably be more of a cost to us because we will have severance costs, but we'll have more net savings towards the end of the year. But it's all built into our forecast. That's in that 375 to 400. But we didn't get into the details of the specific savings.

 

 

---------------------------------------------------

 

As a banker I see trouble for Cally. The above conversation with analysts is entirely negative. Amongst other things, if a company is looking to amend its credit arrangements to ensure compliance with covenants it is a sign of considerable trouble in the balance sheet.

 

As for the argument that they would not have re-signed PM if they were suffering the opposite is the case. If they had let him go the markets would be all over the company. You can only cut your headline player when you and your sales are strong.

[rgk5]

I work at G. Town and have for six years. There is NO basis to the rumour, none.

[tdk8180]

If I were in a position to buy a company like Callaway, I wouldn't change it. I would still keep the brand name because it has an established market share. Besides, years after Callaway is sold to somebody there would be people that still retain brand loyalty and never even realize that it is owned by another company. Like this guy I was talking to, said he hated Titleist drivers, but loved cobra drivers. Acushnet still wins.

[bossofthemoss]

Callaway are definately struggling for sales, that is common knowledge. And a takeover is a strong possiblitiy. NIKE is the one to watch, they have done due diligance on two previous occassions and with Callaway shares valued at $4.50, it is a bargain at the moment.

[zukszoo]

I am thinking that someone is trying to have a little fun on the internet. This same guy posted the same OP and the same post about his pro, word for word, on another site. Someone was a little bored and wants to stir the pot a bit. It was entertaining though.

[obsessedgolfer]

I just got off the phone with my buddy who is a Pro at my local club. His golf business magazines are indicating Callaway's sales numbers are down substantially while TaylorMade's have been up significantly. He attributed this to the release of the R9 (and it's adjustability) versus the redoing of the FT-5 (calling it the FT-9). He felt Callaway will continue to struggle until they join the adjustable clubhead game.

 

Mike

 

Callaway did absolutely terrible with with the Imix so they want stay as far away from adjustability as they can. The rumor might be true lets see in the last 5 years what happened to Callaway

 

Drivers.. Big Bertha was the domininant force in drivers untill TM relased the r7/Burner now TM's Burner has taken the place of the Big Bertha as the go to club in the $300 price range

 

Fairway Woods/Hybrid..Much like the driver catagory Big Bertha was the dominant FW wood, then Callawy lost their dominancy in the FW wood game and year after year TM beats them in FW sales and tour counts. Callaway never had a huge Hybrid hit, and TM and Adams domintate that catagory, TM in sales and Adams in tour counts.

 

Irons... Callaway dominated the market with the Big Bertha irons, now the X irons have taken the place of the Big Bertha as the #1 seller in callaways stable, but TM has taken a huge share of the market with the success of the Burner/r7 irons.

 

Wedges. Callaway wedges were never hot sellers neither are TM wedges. The cattogory belongs to Cleveland and Titliest.

 

Putters.. Callaway allways dominated with Oddessy but TM's Spider putter was a huge hit and turned many people on to TM Rossa putters.

 

Looking at these facts it is not "if" it is "when" Callaway will go belly up.

 

Stupid post of the day, you win. Callaway is not going belly up. True, TM has taken over as the leader in Drivers, but Callaway is still number one in irons. What would you rather have, the margin of manufacturing and selling 8 clubs or 1? And even if Cally loses the iron lead to TM (possible, but not a done deal), there is nothing wrong with being #2. Putters are very high margin products and Odyssey just about sells more putters than the next 5 OEMs on the board combined. Spider was a big hit relative to TM, but relative to Odyssey, it's a joke of a putter at $200.

 

Callaway, like a lot of of other companies these days, is in for some bad numbers and that means downsizing. So what. Cally has plenty of product in the pipeline, a huge distribution channel, strong market share, and plenty of upside. Some Cally employees should be worried, but the company is not going off the map.

 

Callaway golf is a publicly traded company (ELY) and their market cap (share price x number of shares) is about 500 million. Over the weekend was released that Callaway's profits are down 84% which will cause the stock price to drop. So, in short, and correct me if I'm wrong, but Taylormade could pick up Callaway for 400-500 million. Can anyone either confirm my logic or make me look like an idiot?

 

Your basic math, and therefore logic are fine, they just don't apply in the real world. It doesn't make you an idiot, it's a good question. First of all, no one is buying Cally at a discount to the market, so if the market cap right now is $500M, then that's what you can buy them for if it was possible to buy all shares at once at market rates, which it is not. If you want to buy a publicly traded company with a lot of institutional investors then you need a lot of cooperation, and that's going to cost more than the current share price. You have to offer a price above market rates high enough to make the decision for the major shareholders an easy one. So in theory, it would cost TM more like 700-800 million, maybe more if there were other offers.

 

This is how dumb the original topic is: If some moron in a golf shop is talking out of their a** about TM taking over ELY in the coming weeks, then the stock would be at a premium, not flirting with a dead cat bounce on minor news. Had ELY stock been over 10, quickly rising from 7 and there was not any financial news, then something could be brewing. Recent case in point. At the end of March Sun Microsystems was roughly a $4.50 stock, then out of nowhere it shoots to $9, rumors are flying about IBM is buying SUN. So the stock nearly doubled even though SUN was losing money every quarter. No one thought IBM was going to get SUN at the then market cap of roughly $3.5B. When IBM backs out of talks the stock dives back down to the low 6's, why not back to the 4's? Because even though SUN is bleeding money, they are in play, and you have to pay some kind of market premium to get all shares. A few days later, in steps Oracle, and now the stock is back to $9. So if TMAG really wanted ELY, it's not going to happen at $8/share, more like $12, perhaps $15. Not that it matters, because it's NOT HAPPENING!

Callaway may lead in iron sales but there is so much more profit margin on driver sales, and drivers get sold way more.

[rblmp32]

Callaway did absolutely terrible with with the Imix so they want stay as far away from adjustability as they can. The rumor might be true lets see in the last 5 years what happened to Callaway

 

Drivers.. Big Bertha was the domininant force in drivers untill TM relased the r7/Burner now TM's Burner has taken the place of the Big Bertha as the go to club in the $300 price range

 

Putters.. Callaway allways dominated with Oddessy but TM's Spider putter was a huge hit and turned many people on to TM Rossa putters.

 

 

You're showing your age here. The TM 300 series brought the crown for best drivers over to TM back in '01. Then it was the 500 series, which were a massive hit as well. Only in 2004 did the R7's start showing up. And this was long before TM's 6 month product cycle. Back then, it was at least a year, if not more.

 

Spider is popular, but you still see next to no Rossa's out at the local muni's where as two balls and other white hots are everywhere. TM is light years behind Cally here.

[vaca22]

I'm curious to see what kind of year 2009 will end up being for TM. It seems to me (and I could be horribly wrong) that the R9 has been a slow seller by virtue of the fact that it is SO adjustable and your average weekend golfer really doesn't need that level of adjustment. I really do think that the more complicated the equipment becomes, the less likely it is that it will be a hit with the general public. The price for these products will increase as they become more advanced and people will have a hard time justifying spending $400+ on a single club. Maybe we'll see an increase in the sale of drivers at the next lower price level like the Burners or something as a balancing effect, who knows.

 

I think the iMix is an excellent idea that really helps golfers get fitted for the part of the club that will make the most difference for them, and that's the shaft. I never thought it was going to be successful in terms of sales of individual shafts because once you've been fitted for the proper shaft you're probably not going to swap it out when it's windy or if the course is dry. The professionals can do that all day if they'd like, but not everyone else, and "everyone else" I imagine would be the bulk of sales for any of these major companies.

 

One thing Callaway has done within the last several years is branch out to other areas aside from clubmaking. I'm talking about shoes, gloves, clothing...heck, they have more accessories now than any other company, I believe. They even have watches, sunglasses and rangefinders. I've wondered if this was really necessary because I just couldn't see many people flocking to buy Callaway watches or anything like that. Their recent promotion with the $1 fairway woods and hybrids was very interesting though...I know a handful of people that decided to spend $400 on the FT-9 and FT-iQ that definitely wouldn't have otherwise had it not been for the additional clubs that came with the deal. I'm sure their largest profit margins come from the sale of such drivers.

 

Anyway, I don't think TM purchasing Callaway has any real merit unless the company was struggling terribly. The value of their patents and intellectual property alone would command a very high price, and Callaway continues to spend who knows how many millions of dollars in patent litigation with Acushnet, so they clearly still have money to burn. Interesting conversation though!

[obsessedgolfer]

Callaway did absolutely terrible with with the Imix so they want stay as far away from adjustability as they can. The rumor might be true lets see in the last 5 years what happened to Callaway

 

Drivers.. Big Bertha was the domininant force in drivers untill TM relased the r7/Burner now TM's Burner has taken the place of the Big Bertha as the go to club in the $300 price range

 

Putters.. Callaway allways dominated with Oddessy but TM's Spider putter was a huge hit and turned many people on to TM Rossa putters.

 

 

You're showing your age here. The TM 300 series brought the crown for best drivers over to TM back in '01. Then it was the 500 series, which were a massive hit as well. Only in 2004 did the R7's start showing up. And this was long before TM's 6 month product cycle. Back then, it was at least a year, if not more.

 

Spider is popular, but you still see next to no Rossa's out at the local muni's where as two balls and other white hots are everywhere. TM is light years behind Cally here.

Ya, im 14 and have been playing golf for 3 years so my club knowledge does not go that far back, but I do play a muni on a regular basis and rossa's are pretty popular due to them being promoted heavily at Dicks where the majority of people purchase golf clubs.

[Left Rough]

As a banker I see trouble for Cally. The above conversation with analysts is entirely negative. Amongst other things, if a company is looking to amend its credit arrangements to ensure compliance with covenants it is a sign of considerable trouble in the balance sheet.

 

As for the argument that they would not have re-signed PM if they were suffering the opposite is the case. If they had let him go the markets would be all over the company. You can only cut your headline player when you and your sales are strong.

 

Agree - when a company starts managing itself to financial ratios in order to avoid triggering debt covenants is an issue that can't be ignored. And the fact they are being less than forthcoming about it is troubling. Still, it's all fun and speculation (I guess unless a person in personally involved), but once a banker has leverage (Milo I'm sure you can confirm), it completely changes the nature of the game and how a company can operate. See Cerberus/Chrysler.

 

Agree completely about the PM signing.... they had no choice but to resign. Any TMAG/ELY combination would seem to be for cost synergies only, and the brands would probably stay intact.

 

For anyone who thinks Odyssey will keep this company afloat on their own, they make up a minimal % of sales, about half of their 'accessories' division. by comparison, woods are ~30%, irons ~25%, accessories 20%, balls ~15%, putters 10%.

 

Although I like the Nike/ELY combination!