business

Cobra Golf: Speak Loudly, And Sell A Big Stick

For years, Cobra Golf Inc. was about as exciting as the quiet, rolling hills behind its Carlsbad (Calif.) headquarters. Its clubs had a loyal, if modest, following among golfers. But to investors, the real action was at Callaway Golf Co., a Carlsbad neighbor: Callaway's shares have soared sevenfold since it went public in 1992.

Nowadays, investors have an entirely new take on Cobra, No.46 on BUSINESS WEEK's Hot Growth list. Thanks to its King Cobra line of oversized clubs that allow golfers to make better contact with the ball, the company looks a lot more interesting. Analyst Boyd Poston of A.G. Edwards & Sons says earnings could climb 66% this year, to $12.8 million, as sales soar 50%, to $84.8 million. And Cobra's share price has climbed 50%, to 31, since its initial public offering in September.

The inspiration for King Cobra was an even more popular club with an equally oversized name: Callaway's Big Bertha. The large driver, introduced in January, 1991, has an expanded sweet spot that gives golfers a bigger margin for error when powering a shot down the fairway.

Rather than come out with a direct copy of the Big Bertha driver, as other club manufacturers have done with middling success, Cobra Chairman Gary Biszantz, 59, a golfer and former Ford dealer, set out to be the first to make an oversized iron that golfers could use to advance the ball onto the putting green. The strategy paid off. CEO Mark McClure, 43, a former golf pro and ski instructor, calculates that the company has captured a hefty 14% share of the irons market since introducing Cobra's oversized clubs in 1992. He figures Callaway, which introduced its own oversized irons in February, has 7%.

True, the $250 million Callaway is far bigger. "Our export business is bigger than their total business," sniffs Ely Callaway, CEO and founder of Callaway Golf. Still, Biszantz says Cobra has greater momentum when it comes to irons. And McClure believes it will stay that way, thanks to Cobra's cost advantage. During the 1980s, Cobra's founder and chief designer, Tom Crow, perfected a sturdy composite graphite shaft. Today, it owns the plant where it stamps out the ultralightweight sticks. That, together with imported heads from Taiwan, keeps costs down. A set of Cobra clubs costs just about $1,500, vs. $2,200 for a set from Callaway.

To drive home the pitch that its clubs are just as good, Cobra has launched a $5 million network television campaign. The spots feature golf celebrities Greg Norman, who owns a 4% stake in Cobra, and Hale Irwin.

The folks at Cobra still have one major worry: that the new Callaway irons will catch on like the Big Bertha driver. Price aside, Callaway is a popular make. But Biszantz isn't worried. "There's room for both of us," he says. So for now, at least, move over Big Bertha, and make way for King Cobra.

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