Callaway CEO Upheaval A Complex Situation
The letters ' Ely ' stood in lower case for his predecessor, the late Ely Callaway, founder and leader of one of golfs most successful companies until his death in 2001. Ely in lower case was Drapeaus colleague, friend and supporter.
But the same three letters in all caps ' ELY ' make up Callaway Golfs symbol on the New York Stock Exchange, where you have colleagues and supporters only if youre profitable, and where there are no friends.
Drapeau, Elys hand-picked successor, left the company immediately and reportedly without acrimony. But reading between the lines of Callaways own press release, it becomes apparent that Drapeau left because of pressure from the companys board of directors over Callaways recent substandard financial performance. That slide, which included a 60 percent drop in second-quarter net income compared to the similar quarter in 2003 ($13.7 million versus $34.1 million), got Wall Street tongues wagging, and some backchannel talk among analysts predicted Drapeaus departure.
But what his leaving really demonstrates is that companies such as Callaway play not one game, but two: The golf industry game and the public-company gambit. The second game is a blood sport, and the CEO is always out front to either reap the huge rewards or take the proportional fall.
Drapeau presided over Callaways frank self-criticism in June, when the company in a press release reduced its predicted 2004 earnings, citing weaker general sales in Japan and softer metalwood sales than expected after a strong first quarter. The company has also struggled with the costs of integrating the Top-Flite brand, which Callaway bought out of bankruptcy last September. Predicted Callaway sales for 2004 dropped from more than $1 billion to, at most, $975 million, and per-share earnings estimates decreased from as much as 97 cents to 25 cents.
Recent success on tour by chief competitor TaylorMade-adidas Golf, whose innovative r7 quad driver was used by U.S. Open winner Retief Goosen and PGA Tour multiple winner Sergio Garcia, also intensified the competitive environment. So did a feature article in Fortune magazine (July 26), which said Callaways share of the metalwood market had dropped from 30 percent to 16 percent since 2000, while TaylorMades had grown from 17 percent to 20 percent. (Some Callaway watchers, though, have questioned the r7s ability to sell through pro shops as well as it has sold in the shop. Others downplay the effect of the Fortune story, which broke no new ground, they say.)
Fortune called metalwoods a high-margin category, but lately that hasnt been universally true. In Callaways June earnings revision and throughout the industry, experts echoed concern over at least two years of downward price pressure on metalwoods as a reason for sluggish revenue streams. The concomitant pressure to innovate faster and faster, repeatedly recapturing the consumer imagination while not angering buyers with computer industry-style speedy obsolescence, makes golf one of the most difficult subsegments in the leisure products market. And faster (read: more expensive) innovation leads to more late-model closeouts and ' you guessed it ' more downward price pressure.
Pressed on the issue, most experts in golf clubs privately admit that among the top companies, competitors usually manage to stay even with each other in the realm of pure technical merit. Truly objective measures of differences between the r7 quad and, say, the ERC Fusion, Callaways flagship driver, are hard to find and even harder to sell universally. (Callaway got credit among club watchers for the Fusion, which solved the age-old problem of optimal placement of clubhead weight by combining a titanium front with a graphite composite body.) So allegations that Callaway, and therefore Drapeau, simply got out-developed are usually taken advisedly. Callaway has had some product miscues since Drapeau joined the company in 1996 ' the C4 composite head didnt do well ' but in general, there were more technical ' and economic ' successes than failures. (The 2-Ball putter and its progeny did wonders for Odyssey, Callaways wholly-owned putter brand, which Drapeau managed before Callaway acquired it in 1996.)
More telling, and harder to manage, is tour acceptance and success. The r7 quads launch, which gathered thrust from the timely wins by Garcia (Buick Classic, EDS Byron Nelson Championship) and Goosen (U.S. Open), surpassed even TaylorMades lofty expectations. But Annika Sorenstam, the worlds best woman player and far more recognizable than many men on the PGA Tour, has won four times this year, all with the Fusion (she switched to the Fusion from the Great Big Bertha II last September, and used the Fusion for the last of her six wins in 2003). So even tour success by a great player doesnt assure a retail win.
As a unit of a public company (adidas) instead of a listed company in its own right, TaylorMade is immune from direct Wall Street pressures (although the competitive atmosphere at TaylorMade is intense, thanks largely to the energetic leadership of CEO Mark King). Thats not to say that TaylorMade has an easier job than Callaway does, or that TaylorMades achievements over the last few years have been anything other than phenomenal.
But as an NYSE company, Callaway was playing a slightly different game, living under the immense scrutiny that is the price of public capitalization. When things go bad, the head man usually goes. So it went this time.
Industry sources admit that Drapeau, despite his expertise at improving manufacturing and other efficiencies, had a very hard act to follow in Ely Callaway. Drapeau endured as elegantly as he could allegations that he was a manufacturing guy but not a golf product guy ' which was not true (but just to be safe, Drapeau surrounded himself with a top development team). What he lacked, if anything, was the ability to be Ely ' and only one man could do that. Industry watchers say that the late Mr. Callaways knack for managing Wall Street and leading a company emotionally is rarely found in one person.
That may be why Callaway has said privately that the company will take its time finding a successor, who could come from inside or outside the organization. For the present, senior board member William Baker will take over. Baker, 71, has no direct golf industry experience outside of his decade on the Callaway board, but he has been an officer or board member at 11 companies in a 46-year business career.
Email your thoughts to Adam Barr
Kelly beats Monty with two-shot swing on final hole
KAILUA-KONA, Hawaii – Jerry Kelly made an 18-foot birdie putt on the final hole, Colin Montgomerie missed a 6-footer for par and Kelly turned a one-shot deficit into a victory Saturday in the Mitsubishi Electric Championship, the season opener on the PGA Tour Champions.
After Kelly drove it well right into lava rocks on the par-4 16th, leading to bogey and giving Montgomerie the lead, Montgomerie made a mistake with his tee shot on the last, finding a fairway bunker. Montgomerie's approach went over the green and after Kelly converted his birdie, the 54-year-old Scot jammed his par putt well past the hole.
It was the third win on the over-50 tour for the 51-year-old Kelly, who finished tied for 14th last week at the PGA Tour's Sony Open in Honolulu. That gave him confidence as he hopped over to the Big Island for his tournament debut at Hualalai. The limited-field event includes winners from last season, past champions of the event, major champions and Hall of Famers.
Kelly closed with a 6-under 66 for a three-day total of 18-under 198. Montgomerie shot 69. David Toms shot 67 and finished two shots back, and Miguel Angel Jimenez was another stroke behind after a 66.
Bernhard Langer, defending the first of his seven 2017 titles, closed with a 70 to finish at 10 under.
Rahm manages frustration, two back at CareerBuilder
Jon Rahm managed the winds and his frustrations Saturday at the CareerBuilder Challenge to give himself a chance to win his fourth worldwide title in the last year.
Rahm’s 2-under-par 70 on the PGA West Stadium Course left him two shots off the lead going into the final round.
“I wasn’t really dealing with the wind that much,” Rahm said of his frustrations. “I was dealing with not being as fluid as I was the last two days.”
The world’s No. 3 ranked player opened with a 62 at La Quinta Country Club on Thursday and followed it up with a 67 on Friday at PGA West. He made six birdies and four bogeys on the Stadium Course on Saturday.
“The first day, everything was outstanding,” Rahm said. “Yesterday, my driver was a little shaky but my irons shots were perfect. Today, my driver was shaky and my irons shots were shaky. On a course like this, it’s punishing, but luckily on the holes where I found the fairway I was able to make birdies.”
Rahm is projected to move to No. 2 in the world rankings with a finish of sixth or better on Sunday.
Cook leads by one entering final round at CareerBuilder
LA QUINTA, Calif. – Austin Cook hit a hybrid into the fairway bunker on the par-4 18th on a breezy Saturday afternoon at La Quinta Country Club, then chunked a wedge and raced a chip 20 feet past the hole.
Kip Henley, the longtime PGA Tour caddie who guided Cook to a breakthrough victory at Sea Island in November, stepped in to give the 26-year-old former Arkansas star a quick pep talk.
''Kip said, 'Let's finish this like we did on the first day at the Nicklaus Course.' We made a big par putt on 18 there and he said, 'Let's just do the same thing. Let's get this line right and if you get the line right it's going in.'''
It did, giving Cook an 8-under 64 and a one-stroke lead in the CareerBuilder Challenge going into the final round on the Stadium Course at PGA West. Fellow former Razorback Andrew Landry and Martin Piller were tied for second, and Jon Rahm and Scott Piercy were a another stroke back after a tricky day in wind that didn't get close to the predicted gusts of 40 mph.
''I know that I wouldn't have wanted to play the Stadium today,'' Cook said. ''I think we got a great draw with the courses that we got to play on the days that we got to play them.''
Cook played the final six holes on the front nine in 6 under with an eagle and four birdies.
''Starting on my fourth hole, I was able to make a birdie and kind of get the ball rolling and it never really stopped rolling,'' Cook said. ''Kip and I were doing really good at seeing the line on the greens.''
After a bogey on 10, he birdied 11, 12 and 15 and parred the final three to get to 19-under 197.
''I think that tonight the nerves, the butterflies, all that will kind of be a little less,'' Cook said. ''I've been in the situation before and I was able to finish the job on Sunday. I think it would be a little different if I didn't play like I did on Sunday at Sea Island.''
He's making his first start in the event.
''I came in from Hawaii on Monday, so I only had two days to prepare for three courses,'' Cook said.
Landry, the second-round leader, had a 70 at the Stadium. Piller, the husband of LPGA tour player Gerina Piller, shot a 67 at La Quinta. Winless on the PGA Tour, they will join Cook in the final threesome.
''Piller's a good guy and we have played a lot together and same with Cookie,'' said Landry, the only player without a bogey after 54 holes. ''Hope the Hogs are going to come out on top.''
Rahm had a 70 at the Stadium to reach 17 under. The third-ranked Rahm beat up the par 5s again, but had four bogeys – three on par 3s. He has played the 12 par 5s in 13 under with an eagle and 11 birdies.
''A little bit of a survival day,'' Rahm said.
The wind was more of a factor on the more exposed and tighter Stadium Course.
''The course is firming up,'' Rahm said. ''I know if we have similar wind to today, if we shoot something under par, you'll be way up there contesting it over the last few holes.''
Piercy had a 66 at the Stadium.
''I controlled my ball really well today,'' he said.
Adam Hadwin had a 67 at La Quinta a year after shooting a third-round 59 on the course. The Canadian was 16 under along with Grayson Murray and Brandon Harkins. Murray had a 67 on the Nicklaus Course, and Harkins shot 68 at the Stadium.
Phil Mickelson missed the cut in his first tournament of the year for the second time in his career, shooting a 74 on the Stadium to finish at 4 under – four strokes from a Sunday tee time. The 47-year-old Hall of Famer was playing for the first time since late October. He also missed the cut in the Phoenix Open in his 2009 opener.
Charlie Reiter, the Palm Desert High School senior playing on the first sponsor exemption the event has given to an amateur, also missed the cut. He had three early straight double bogeys in a 77 on the Stadium that left him 1 over.
John Daly had an 80 at La Quinta. He opened with a triple bogey and had six bogeys – four in a row to start his second nine - and only one birdie. The 51-year-old Daly opened with a 69 on the Nicklaus layout and had a 71 on Friday at the Stadium.
Phil misses CareerBuilder cut for first time in 24 years
Phil Mickelson missed the cut Saturday at the CareerBuilder Challenge. It’s a rare occurrence in his Hall of Fame career.
He has played the event 15 times, going back to when it was known as the Bob Hope Classic. He has won it twice.
How rare is his missing the cut there?
The last time he did so, there was no such thing as a DVD, Wi-Fi, iPods, Xbox, DVR capability or YouTube.
The PGA Tour’s Jon Rahm didn’t exist, either.
The last time Mickelson missed a cut in this event was 1994, nine months before Rahm was born.
Mickelson struggled to a 2-over-par 74 in the heavy winds Saturday on the PGA West Stadium Course, missing the 54-hole cut by four shots. He hit just four of 14 fairways, just nine of 18 greens. He took a double bogey at the 15th after requiring two shots to escape the steep-walled bunker on the left side of the green.
Mickelson won’t have to wait long to try to get back in the hunt. He’s scheduled to play the Farmers Insurance Open next week at Torrey Pines in La Jolla, Calif.