If you play golf the way I do, your clubs probably have the longevity of a middle-school romance. Most golfers rarely have time to practice, and the brunt of so many duffs, hooks, and slices are borne by the equipment.

This trend of frequent club replacement should be a good thing for cutting-edge manufacturers such as Callaway Golf (NYSE:ELY). However, the company has been caught in a quantity/quality quandary as of late, and its shares have lost more than half of their value since April. Recently, Callaway hired a new CEO and initiated a "full business review," including re-evaluating the timing of new product launches and strengthening its financial position.

Callaway reported a 16% drop in revenues for the third quarter, which was also 11% below analysts' expectations; the company dropped prices to clear 2004 club inventory and also delayed the launch of products while it completes this transition. The company's net loss of $0.46 per share was a cent wider than estimates and was a turnaround from the $0.04 per share earned last year.

Competition from companies such as Nike (NYSE:NKE), Titleist, and TaylorMade has pushed Callaway, but it is still the No. 1 golf club manufacturer. The company has also strengthened its golf market position by purchasing Top-Flite, a leading ball maker, which has boosted it to the No. 2 position in that category.

Third-quarter results aside, the obvious transition in product mix has begun. Woods (not Tiger) made up 31% of total sales at the end of 2003 and accounted for only 11% of sales in the third quarter; irons shifted from 33% of sales to 28%; putters were 18% of sales in 2003 and only 12% in the latest quarter; balls made a dramatic increase from only 12% of sales to 32%; and accessories and other items (including apparel) were 8% and are now about 17% of sales.

The Callaway Golf brand accounted for 21% of Ashworth's (NASDAQ:ASHW) apparel sales, as part of a licensed partner agreement between the companies. Callaway has continued its popular "Trade-In! Trade Up!" plan, through which buyers can trade their old Callaway clubs for new ones and receive a prorated discount. The company produces highly respected and coveted lines of clubs, including the Odyssey and the Ben Hogan lines of putters and clubs.

The company's strong brand name will go a long way toward supporting a decent revamped operating strategy. Callaway is planning to launch three new products by the end of 2004, with these products targeting categories less dependent on retail inventory levels and more reliant on consumer demand. The shares should be seen as fairly risky, given the fragile nature of current earnings expectations. However, given the company's decent 2.92% dividend yield and strong share of the popular golf market, the shares should be monitored closely.

Take a couple of practice swings before you line up these other views:

Fool contributor Phil Wohl spent more than 12 years on Wall Street and has a low 18-hole score of 82. He does not own shares of any of the companies mentioned.