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Tickers in this Article: KSWS, NKE, GOOG
Her name may have once been one the most common search strings on Google (Nasdaq:GOOG), but these days, former tennis player Anna Kournikova is basically yesterday's news.

So when classic tennis shoe maker K-Swiss Inc (Nasdaq:KSWS) choose her to be their spokesperson this year, I was struck by the fact that the choice immediately invited a comparison with rival Nike Inc.'s (NYSE:NKE) latest endorser, the current queen of the center court Maria Sharapova; a comparison that can't possibly be to the advantage of K-Swiss.

In Sports and Business, Go With a Winner
Whether it's on the professional tennis court or the business of selling sports-inspired fashion being a winner is as much about image as ability. Unlike Kournikova, Sharapova has a good supply of both, which explains why Nike choose her as their spokesperson.

She's the world's highest paid female athlete, winner of two grand slam singles titles, and the reigning winner of the women's US Open. You'll be seeing a lot of her, and the products she is endorsing, as tennis season gets into full swing with the upcoming French Open, Wimbledon, and US Open matches over the next couple of months. We may even get a chance to see her wearing another revealing Nike outfit,which caused as much of a sensation as her playing at last year's US Open. You can't buy that kind of publicity.

Sadly, Kournikova's professional tennis career was cut short by injury and she hasn't played in years. Even when she was on the circuit, her results were somewhat less than impressive. While she definitely has certain obvious physical charms, her lack of actual accomplishments as a singles player led cable sport channel ESPN to rank her 18th in its "25 Biggest Sports Flops of the Past 25 Years" league tables.

The girl has no media image beyond what K-Swiss is now trying to create via a series of commercials. For a relatively small outfit that spends a great deal on TV advertising to get its brand out there in a market dominated by gorillas like Nike, this doesn't look like money well spent.

Even Great Products Have a Finite Life Span
While K-Swiss does make a full range of high performance tennis shoes, it's real money maker (comprising about 2/3rd of revenues) is the legacy "Classic". It was originally designed as a high-performance professional tennis shoe when it first came out back in 1966, but it's now marketed more as off-court "athleisure" footwear. The problem is, that while this product continues to sell well internationally, it has been loosing ground rapidly in North America where other manufacturers of low-rise Euro-inspired looks are taking market share from it. While the Classic is a timeless shoe, and at $60 a pair it's priced competitively, it appears to be missing the mark fashion wise in its primary market.

In a market situation like this, it seems to me that trying to re-ignite interest in the brand by associating with a relatively low-profile ex-sports personality won't do the trick. While they've had a more than forty-year with a great product like the Classic, maybe it's now time for K-Swiss management to start taking more risks and try launching some new and truly innovative products that appeal to this potentially rewarding leisure footwear market. To date, most of their product innovation efforts have been directed at the much narrower professional tennis players market, which make up only a fraction of its sales.

If they don't, they'll likely continue to see further declines in sales and earnings. Already, Street consensus is looking for a drop in revenues and net income of 12 percent and 33 percent respectively for 2007.

My sense is that the company has now reached the equivalent of "match point" in its business life with the advantage to a competitor with a much better game plan.


Shares Still Look Pricey

Due to the expected decline in revenues and earnings, the shares have slid more than 27% from their recent peak price of almost $38 late last year. However, the valuation still looks pricey, especially when compared to market leader Nike. Despite it's difficulties, K-Swiss still sports a forward price-earnings ratio of 19.2x. Nike,which is on a much more solid growth track, can bebought at only 18x this year's expected earnings.

I suspect there's more downside to come.

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